7 Tips to Increase Your Chances for a Small Business Loan Approval

Last Updated May 18, 2020 | Published on Oct 18, 2019 | Small Business

Are you planning to launch a new startup? Perhaps you’re planning on injecting some cash into your growing enterprise. At some point, anyone who’s running a small business will need to borrow money to have more working capital, cover cash flow gaps, or finance their business’ growth and expansion. When the numbers are less than stellar, business owners must learn how to increase their chances of securing a loan.

Going through the small business loan application process doesn’t have to be a hair-splitting process especially now that reputable lenders are more open to giving them. When they are trying to decide if your business is a viable prospect, these lenders look at you as a small business owner and your business as a whole. This is why industry experts say that preparation will make all the difference in obtaining the funding your company needs. The following tips will help you improve your chances of securing a small business loan from traditional financing sources.

Craft a Rock-Solid Business Plan

Typically, lenders are interested to find out if you’ve carefully thought about your business growth and operations strategy. They do this by looking into your business plan. Having a rock-solid business plan in place is always a smart idea for any small company especially when your business is just getting everything off the ground.

Be Well-Prepared Before Meeting with The Lender

Your prospective lenders will have a look at your credit as well as the profitability of your business. Your odds of getting funding will depend on how well you’ve buttoned up before applying for a loan. Put your best foot forward by having any recent credit paid off and crafting a business resume that can help you stand out from the competition. Furthermore, they will also want to review your business’ financial history and growth plan so that they can have a clear overall picture of your company. Plus, this can also significantly decrease the amount of time it takes for you to obtain a business loan.

Related: 8 Things You Need to Do Before Applying for Small Business Loans

Know the Type of Loan You Require

Various types of small business loans are available out there. You’ll have to do your research before you can decide which one will best suit your needs. You can obtain relevant information by reaching out to your local chapters or websites and looking into specific programs offered by several types of lenders. This will help you as you submit your applications.

Research Multiple Financial Institutions

Looking into several reputable lenders and applying to at least three of four different ones will dramatically increase your chances of getting a small business loan. When it comes to small business financing, lending options are virtually endless. For this reason, it’s important to look for a program that would work best for your company as a whole. To get started, research both large and local banks as well as alternative lenders. Check if these prospective financial institutions have worked with companies that are in the same industry and stage as yours.

Determine Your Possible Payment Alternatives

Since traditional lenders tend to look for at least two sources of repayment before they approve a small business loan, you’ll need to write out a detailed proposition for how you will repay your loan in a timely manner. In other words, they’ll need proof that you have viable options or collateral to pay them back. Mapping out a repayment plan and presenting an effective back up as early as possible is extremely helpful. It will not only be good for your prospective lenders, but it will also cause you to have one less thing to plan in the near future.

Know the Risk Lenders Look At

Did you know that bankers and lenders evaluate potential borrowers on a risk scale? When lenders think you’re a risky asset, you won’t have your loan approved. Risky borrowers have poor earnings, slow or past-due loan or credited history, too little owner’s equity, questionable management, inadequate accounting system, and low-quality collateral.

Be on Your Best Behavior

Your personal character matters to your prospective lenders. Since they want to find viable borrowers who will pay them back, they’ll take a look at your moral and ethical character before they decide to approve your small business loan application.

Related: 4 Reasons Lenders Reject Your Business Loan Application

Talk to the Lending Experts About Your Small Business Loan Application!

If you want more small business loan application tips, don’t hesitate to contact SMB Compass today.

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