Loans are a Necessity in Today’s Small Business Environment
Is anyone’s idea of a good time preparing for any type of loan application? Probably not – but loans are a necessary and beneficial component of any quality money management plan, on both the personal and business side. Why is it then, that preparing for a loan application seems like the last thing anyone would want to do? Loans help people. On the consumer side, loans can help an individual consolidate debt, pay for student expenses, finance a car, or purchase a home. On the small business side, loans are equally as beneficial – maybe even more so, due to the fact that businesses require substantial startup capital, consistent cash flow, and a constant source of emergency cash to support things like inventory, payroll, and marketing. Preparing for a small business loan application is a smart thing to do, and it doesn’t have to be painful!
Know What Your Lender Wants, Before They Ask For It!
Lenders are all very similar in that small business loans are generally made to those who can afford to pay them back. Loans for small businesses vary significantly in terms of how they are structured; yet all small business lenders are going to want to know how much revenue your company has generated to gauge how much of a payment your business can afford. Higher revenue typically allows for a higher loan amount, with a resulting higher payment. That said, providing two to three months of bank statements is always a good idea, as it allows a bank to see what type of income is generated by the business. Another idea is to bring in your credit card merchant statements to show the credit-based sales your company is making. For some small businesses, this may be the only revenue stream, so merchant statements are a great way to show income.
Paint a Complete Picture!
Lenders want to know more than how much money your business makes. They also want an idea of how the loan will be used. Having a basic framework or plan for the loan is a smart thing because it provides a small business loan underwriter with a bigger picture of your business and the loan you are applying for. The bottom line is – be prepared with income documentation, and give the lender a reason to say yes to your loan. Do your homework, paint a complete picture, and let the business loan company know how they can partner with you and enter into a mutually beneficial relationship.