What Affects Your Chances of Getting a Small Business Loan?
If you’re starting a new business, you aren’t in the minority if you need some financial assistance. Unless you’re fortunate enough to have a huge cash reserve on hand or have inherited money for the business from another source, you’ll need some funding to get started. One of the most popular methods of getting this financial help is through a small business loans. Guaranteed by the government and having been used by business owners in all types of industries, these loans can be a viable way to purchase workspace, supplies and equipment, and even paying staff. There are a few important things to keep in mind as you work to get approved for one of these loans.
Have a Plan
Before you seek for a loan from a financial institution, make sure you have developed a well-though-out business plan. Bank want to see that your business has potential and that you have carefully considered how to market your products and services, to whom you will market them and how you will handle competition and other challenges. Your business plan should inspire confidence in the mind of the lender that their investment in you will pay dividends for them.
Have Good Credit
Credit score will come into play with virtually any type of financial assistance. The higher your score, the better chance you have of securing a small business loan and of getting the rate and term you’re looking for. If you have poor credit, you may be denied, or, at best, you will have a high interest rate. You’re better off working with a credit counselor to pay off debt and raise your score to a more favorable level. Once you have done this, you will be in a better position to get the loan. Lenders want to see that you have a history of good spending and buying habits and that you will be able to repay the loan.
What do You Bring In?
If you are an established business, the lender will want to have a look at how much revenue you generate each month. This will help the lender decide whether to loan you money and how much you will be able to pay back.
How Long You’ve Been in Business
Also for established businesses, the longer you have been in operation the better. If you’ve been around for years, the lender will know you have some financial strength behind you.
Getting a small business loan can help you thrive. Make sure you understand these guidelines.