How to Apply for Business Loans

It can be a little bit unnerving when you first start looking for a business loan. After all, the outcome of that situation is going to make a difference in your ability to keep your business going. For the most part, you should not have a difficulty receiving your business loan but there are some things to keep in mind to make sure that is going to work well for you. That is why we are providing you with these tips that will help make the entire process easier.

Step 1: Understand Your Needs. 
One of the biggest difficulties that people run into when applying for a business loan is not understanding what they need. Before you ever even fill out the application, have a firm idea of how much money you need in order to do what is necessary for your business. This will also help the loan to go through smoothly, and you may even find that you are able to get more money than what you actually need. It is always good to have a starting point, however, so make sure that you take this step before you begin.

Step 2: Have a Business Plan. 
Have you come up with a business plan? If you haven’t, you’re going to have a very difficult time getting any type of finances for your business. Most lenders are going to want to see a detailed business plan that will not only have your immediate needs outlined but will also have your vision for the future. Although everybody is aware that these business plans change from time to time, having one available upfront will make it easier for the lender to see where the money is going to be spent and why it is needed.

Step 3: Maintain Your Focus. 
Any lender is going to want to see some type of experience in your field. For example, if you’re trying to apply for business loans for a restaurant and you have never owned a restaurant or even worked in a restaurant, you may have a difficulty. Education in this regard is also something that can assist you. You must be very focused on your subject in order for the loan to be approved.

Step 4: Be Professional. 
Always go into the lending process with a very professional attitude. This is more easily displayed when you apply for the loan in person and the majority of you are going to be trying to get the loan online. This is where you also need to have the business plan established properly. Since you’re going to be unable to display your professionalism in person, you need to allow the business plan and other documentation to speak for you.

4 Steps to Take Before Applying for a Small Business Loan

1. Clean up your credit report
  • Before you apply for any funding, you should request a copy of your personal and business credit reports and do a thorough review.
  • Check for any misinformation or reporting errors, and clear up any mistakes that may be harmful before you start your application process.
  • Even seemingly innocent details like a misspelled name or an address you can’t remember ever living at may indicate potential fraud or other problems; so be sure to follow up on any discrepancies.
  • If there’s an error in the information reported from a creditor, it’s often easier to go to the company that made the report directly and discuss the situation with them before turning to the reporting agency.
  • One instance might be the report of a late payment on a credit card that you’re sure you paid on time. Rectifying errors promptly before you start applying for loans will make the road ahead much smoother.
2. Prepare a killer business plan
  • Researching and drawing up a business plan can be tedious, but a well-thought-out plan is essential for a winning loan application.
  • It’s an opportunity to flaunt your experience and qualifications, and an excellent exercise in self-reflection and meticulous planning for every business owner.
  • Your business plan should include extensive market analysis and specific income, expense, and cash-flow projections that will stand up to scrutiny.
  • In the funding request section of your business plan, give details of exactly where each dollar of the loan will be going, and prioritize the uses to which you’ll be applying the funds.
  • Even if you aren’t approved for the full amount you requested, you may be approved for enough to fund your most important projects. This also helps you make sure you aren’t applying for funds you don’t need.
  • Businesses often overestimate their funding needs, which can lead to unnecessary loan rejections or interest charges that could have been avoided.
3. Know what you have to offer
  • Most lenders don’t want to be the only party taking on risk. They want to know that you’re also investing in yourself.
  • Many small business owners dip into personal savings, 401(k)s, or a home equity line of credit to get their businesses off the ground.
  • You should also prepare a collateral document itemizing which business assets you have that can be used as collateral. This can include personal assets like your house, car, or even a college fund.
  • Business assets might include property owned by the business, such as real estate, vehicles, or inventory. Having adequate collateral to back up your loan will make it much easier for a lender to say “yes” to you.
4. Find the right lender for a small business loan
  • Finally, once you have your application materials in order, you should take the time to research different your lending options.
  • Big banks are an obvious option, but their approval rates can be much lower than for often-overlooked alternatives such as small, local banks or credit unions. This is partly because they attract more applicants. But be prepared for a potentially less personal and less flexible approach.
  • Big banks rely on automated methods to sort through the high volume of applications they receive, so rigid numbers like credit scores play a major role and you could end up rejected before anyone’s even glanced at your business plan.
  • Lenders can also differ in their specialties or the services they provide.
  • If you have a favorable relationship with a bank, they are more likely to approve you. Some lenders may specialize in SBA loans or have initiatives to encourage certain types of businesses with favorable rates.
  • Researching which lenders are most likely to take an interest in your business, or using a service that matches you with appropriate lenders, can save you time, money, and the disappointment of rejection.