Understand Your Lender & You Increase Your Odds of Loan Approval
Lenders today must make loans in order to stay in business. Getting a small business loan is made easier once you understand what a lender looks for, how they like to see documentation, and what the risk versus reward equation looks like. Lenders, whether located in the banking field or established as an online small business loan provider, want to provide loans to those who qualify. Looking to apply for a small business loan? Take note of these 5 easy guidelines to increase your odds of getting the small business loan that your company needs:
1. Keep Records
Recordkeeping is important because it provides a lender with a financial snapshot of your business. Receivables, debt, revenue, inventory amounts, and other key financial indicators are important for a lender to look at. Plan on providing, at the least, two to three months of bank statements and your last three months of credit card merchant statements. These two items are valuable for establishing the flow of revenue into the business, as well as the corresponding loan amount for which your business may qualify.
2. Business Profile is Important
You want your lender to look at you as an individual or a company with history, versus just a number. Give them a snapshot of what your business is all about, with a high-level business plan and some additional information about your business that won’t appear on the loan application. Personalize the interaction and you’re bound to see better results.
3. Find a Reputable Lender
Banks and credit unions are good places to seek small business loans, but typically require immense documentation, and approval rates can be low. On the other hand, some small business owners have taken loans from payday lenders – a group of lenders notorious for predatory interest rates who are not really in the business of giving out small business financing. A payday loan against your personal credit places you and the business at substantial risk. It is important to find a lender that specializes in the exact small business loan that you need, not just the quickest source of cash.
4. Check Online for a Lender
A terrific alternative nowadays is the online small business lender. These small business loan sites enable a quick and efficient transaction with much higher approval rates than traditional sources. Of course, ensure that the lender specializes in all types of small business loans to guarantee you’re getting a tailor-made option. These online small business lenders typically make the entire transaction a simple affair, as a quick application, simple documentation and quick funding are the norm.
5. Asset-Based Lending or Factoring May Be the Answer
Overly rigorous small business loan requirements can be minimized when you consider asset-based lending or factoring. Asset-based lending forecasts your account receivables and allows you to borrow against these assets. With the payments typically level-set to the amount of revenue realized, these loans are flexible and affordable. An online search will provide more information about these types of business loans.
Small business loans don’t have to be difficult to obtain, and by following the five guidelines listed above you can dramatically improve your chances of getting the small business loan you need.