When it comes to funding for small businesses, there are lots of traditional and alternative lenders with options. A small business loan can help you grow your business, expand to new territories, hire new employees, improve sales/marketing efforts, and so much more.
Below, we’ll give you 10 steps to help you get a small business loan:
10 Steps to Small Business Loans
Understand Your Options: you have several options when it comes to small business funding:
A small business line of credit
Accounts receivable financing
Working capital loans
Small business term loans
SBA small business loans
Equipment loans
Small business credit cards
Consider available lenders: the market is full of lenders who are willing to work with small businesses, including:
Direct online lenders
Commercial banks
Community banks
Peer-to-peer lending sites
Lenders backed by SBA guarantees
Consider your business credit score and risk profile: lenders consider the following when determining your creditworthiness:
Credit score/report
Cash flow/outstanding debt
Business assets
Time in business
Company investors
Financial statements
Get financial statements in order: the lender will probably carefully go over your financial statements and accounting records. This includes:
Balance sheet
Profit & Loss Statement
Cash flow Statement
Gather info for your loan application: if you want to get a small business loan, you must be willing to give detailed information and documentation regarding your business. This includes:
Name of business (DBA)
Federal EIN
List of execs and their backgrounds
Legal structure of business
Financials for the previous 2 to 3 years, and YTD financials
Projected cash flow
State filings
Copies of insurance policies
Amount of loan request
Business credit report
Collateral for loan
Financial statements from the principal shareholder owner of the business
Business plan
Tax returns for the previous 2 to 3 years
Business bank statements
Specify how much you need and what it will be used for: you may want to get a bit extra In case you have a cash flow issue that lasts a month or two. This can help you avoid defaulting
Determine what security/guarantee you can provide: the lender wants to know you can pay back your debt, so you may have to provide collateral.
Analyze terms on proposed business loan: in order to make sure that it makes sense, you’ll want to analyze the following:
What is the interest rate and is variable or fixed?
How often is interest payable?
When is principal due or is it amortized over the life of the loan?
Is there a loan origination fee?
Are there other costs associated with the loan?
What covenants are imposed on your business?
What circumstances lead to lenders calling default?
Does the loan require security or collateral?
Are there limits on how you can use it?
What reports are required
Can it be paid early without penalty?
Review online profile and postings: a lender is likely to review everything they can about your business and the principal owners. Check to see if you need to make changes or remove any information:
Company’s website
Social media presence
Yelp reviews
Personal postings on principal owners’ social media pages and website.
Learn more about the process of small business lending: the more you know, the easier it will be to get a small business loan.
Conclusion
If you are in need of a small business loan, remember there are plenty of lenders that can help. There are also many different loan options to meet your needs. Consider contacting Achieve Capital Advisors to find out more about small business loans.