How Hard Is It To Get a Business Loan?
No one gets excited about the prospect of going through the loan process. There certainly are barriers you must go through in order to be approved. Getting the loan doesn’t have to be overly stressful if you take the proper steps and have your affairs in order. Here are the questions you can answer for yourself to make the loan process go smoothly.
What Type of Loan Do You Need?
Most responsible lenders want to have some inkling of why you want a loan. Are you starting a brand new business or seeking to grow an existing one? The answer will affect what you can qualify for. Startups will have a more challenging time finding funding and may have to rely on personal loans or credit cards. An established business will be more apt to obtain traditional loans.
It may be you’re looking to have the working capital to cover routine expenses. A line of credit can be a great way to get the money you need as you need it and with lower rates than with a credit card. In any case, be sure to investigate SBA loans. These are loans from traditional lenders but are backed by the Small Business Administration. SBA loans can open up access to better rates and terms, especially if you can’t qualify for other loans.
Are You a Good Credit Risk?
The chances of getting approved are determined by how the lender assesses your risk and your repayment odds. You improve your chances by thinking ahead and taking care of these critical factors in the loan decision.
Annual Revenue: How much are you making? The lender needs to see that you’re earning enough to cover your expenses and repay the loan. Figure what you can afford to budget ahead of time and don’t strain the business unnecessarily.
Time in Business: Most lenders want to see that a business has been operating from one to two years at a minimum before they consider lending.
Credit History: A good credit score is always a plus for an applicant. If you try to take out too many loans in a short time or have a less than stellar history of paying on time, you ding your score and reduce your chances of gaining loan approval.
Available Collateral: If you can secure the loan with a piece of property, you put the lender at ease and improve your odds of loan success. Consider whether you have real estate or equipment you can offer. Be prepared to provide a personal guarantee if necessary.
The process of getting a loan takes some work but will be worth your time if you patiently take the proper steps.