Before the Great Recession hit hard, it was much easier to get business loans. You have to meet certain requirements before the lender can grant you the loan. Below are 7 steps you may want to take when applying for business loans. keep reading
Develop a relationship with the lender
Even before you need the loan, you may want to develop a relationship with the lender. The main people should be familiar with your business. Keep in mind that lenders like to do business with people they can trust. Therefore, let them know as much as possible about your business.
purpose of money
You may want to decide on the purpose for which you applied for the loan. Make sure you get a loan for a good purpose. For example, you can get a loan to buy equipment, property, or software. However, it is not a good idea to take out a loan to finance losses or to obtain unimportant business assets.
Business needs
You may want to make an assessment of how much money your business needs. If you have a small business, you may not want to take out a large loan. However, make sure you don’t underestimate the money you need to keep your business running. Both underestimation and overestimation can cause problems in the future.
credit score
Lenders generally consider an entrepreneur’s personal credit before making a loan. So make sure you have a good credit rating. If you have a bad rating, be sure to work on it to get a good reputation.
Find the lender
You may want to read up on the type of lender that best suits your business needs. For conventional loans, you can go to commercial banks. However, its parameters are strict. Non-bank lenders are another option to consider. Then there are the region-specific lenders that include banks and other institutes that are interested in economic development in those areas. Lastly, you can check out crowdfunding websites, especially if your capital needs don’t exceed $10,000. For personal ones, you can also check out peer-to-peer websites like The Lending Club and Prosper.
Loan Application Package
You may want to prepare the loan application package. This includes documents submitted to apply for a business loan. It typically includes a business plan, profit and loss statements, balance sheets, and cash flow statements, just to name a few. You may want to note that lenders may also check your social media pages while doing their research.
Hold on
Once you have submitted the required documents, you may need to wait 15-30 days for a response from the lender. You can check in weekly to get an update. Lenders may generally require additional documents before granting the loan.
So, if you have been thinking about applying for a business loan, we suggest you follow the steps explained in this article.