Small Business Loans offer one of the best ways to finance a new business or expand an existing one. These loans are not easy to come by and require business owners to jump through several hurdles to apply and be approved but an approval can inject much needed capital into a business and help it grow to its fullest potential. While it can seem overwhelming to try to navigate the process of applying for a small business loan, there are steps business owners can take to mitigate issues that may prevent them from being approved for a loan. We recommend avoiding these four things as you prepare to apply for a small business loan:
- Being disorganized. Lenders for small business loans require paperwork – a lot of it! They will review the information you provide with a fine tooth comb to understand who you are, what your business does, its potential for growth and why they should approve your request for funds. Typically you will need to have paperwork such as a business plan, personal credit report, business credit report, financial statements and collateral. It takes time to gather months' worth of statements so be sure to begin gathering your documents well before you apply for the loan.
- Lack of vision. Lender want to know what you plan to do with the funds and to understand what your business is about. How viable is the market that you are in? Will it be around in three to five years? Having a thorough business plan that explains the current state of the market you are in, potential areas for growth and issues you will need to address can show a lender that you are serious about your business.
- Not having a cash flow. You need to show you have money in order to qualify to get money. Sounds crazy, right? Well empty pockets scare lenders. They want to see that you have a stream of income and have the ability to repay any loans you are approved for.
- Not responding to lender requests. The loan application process takes time and may require you to have an open line of communication with the lender. You may be asked for additional documentation or explanations on paperwork submitted. It is important that you respond to requests in a timely manner or explain why you need time to secure certain support documents. Being by proactive and quickly providing requested information, you can show the lender your willingness to work with them and speed up the approval process and.
Running the gauntlet of the small business loan application process can be a stressful time in the life of a business owner but it is worth the effort as the influx of capital can translate into great things for the organizations. Following the tips above will help owners navigate the process with ease and help ensure a successful outcome: APPROVED!