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Are you considering a small business loan to take your business to the next level, but feel like you lack knowledge about the process and the options? There are many reasons small business owners seek out loans, but typically speaking, loans are sought to scale the business, and ultimately make it more profitable. This might include investing in real estate, equipment, and inventory purchases, for example.
While a small business loan can be an excellent stepping-stone to help you accelerate the growth of your business, many small business owners are unsure where to start or how to get one. There are certainly plenty of available options, but reviewing them all doesn’t have to be a complex process. If you need help getting started, here are five steps you can take to streamline the application process, increase your chances of approval, and ultimately, set your business up for success.
When it comes to getting a small business loan, try to adopt the perspective of a bank or lending company. They need to weigh the risk of lending to you and your level of preparation can make all the difference. There is no room for improvisation on a small business loan application, which is why it’s important that you do the necessary homework first.
Establish your reason for borrowing and determine your needs. Create a financial plan that contains a detailed estimate of the funds you will need. Develop a carefully planned budget containing evidence-based information such as financial forecasts, profit and loss statements, and cash flow records. Assemble any other supporting documentation you may need to submit with your business plan. This can include your formal business plan, bank statements, personal identification documents, and similar documentation.
There are many different types of small business loans, and you’ll need to do your research in order to understand which financing option is the best fit for your needs.
The loans can be vastly different depending on the purpose of the financing and how quickly you need access to it. Get to know the basic information and main differences between some of the core small business loan types: long-term versus short-term, equipment, working capital, and government-backed loans.
There are many factors that influence whether you’re eligible to obtain a small business loan. Most lenders will need to pull your credit rating to process your application. The very fact that a potential lender is reviewing your credit history can have an impact on your credit score, so it’s best to be strategic in deciding what and how many loan applications to make. That said, there are also lenders who do not do a hard credit inquiry and instead consider alternative qualifying criteria such as annual revenue. Understanding how you’ll be assessed and preparing accordingly can greatly improve your chances of approval and also spare you wasting time on applications for loans you aren’t likely to qualify for.
Your small business loan application is only as good as your documentation. Even if you have a pristine credit history and an excellent business plan, submitting your application with missing or ill-prepared documentation can cause your application to be rejected. If some of your documentation is older or out of date, be sure to review it prior to submitting your application.
Below are some of the documents you may be required to submit:
Give yourself ample lead time to apply. The time between application and approval differs depending on various factors, including loan amount, loan type, and lender. Application forms for some traditional providers such as banks and credit unions are lengthy and require extensive supporting paperwork. The wait time to hear back on your loan application from these traditional lenders is also usually lengthy, sometimes ranging from one to six months. However, one way to streamline or speed up your loan application is to choose an online lender like Fundbox, as they can generally provide you with a credit decision in minutes. This is because online lenders typically utilize the latest digital software and automate the application process to ensure it is quick and efficient. Nonetheless, preparing ahead of time, as outlined here, will help you tackle the application with greater ease and efficiency.
Don’t let costs or unfavorable terms catch you by surprise. Be sure to carefully read all the fine print. Be on the lookout for application fees, early repayment fees, late repayment fees, and SBA loan guarantee fees — all these can have an effect on your annual percentage rate (APR).
Many small business owners seek out loans to accelerate the growth of their business. You may be unsure where to start or how to get one. While there are many available options, reviewing them all doesn’t have to be a complex process.
Taking on a small business loan is a big commitment and it’s normal to be a bit apprehensive. Business owners typically wear many different hats and have much going on, so their time must be spent wisely. You don’t want to invest valuable time putting together a loan application only to have it denied. It’s best to approach it with careful consideration and proper preparation. With planning, research, and proper documentation in hand, you can ease your way through the process, save time, and increase the odds of approval.
A small business loan can be an important step forward for your small business, helping to set you up for ongoing business growth and success. Follow the five steps outlined above to optimize the efficiency of your small business loan application and increase your chances of approval.
If you are interested in fast and flexible funding to take your small business to new heights, but do not have the time to invest in all the paperwork, check out some of the modern fintech options out there. With Fundbox, you can apply for funding online, and with no paperwork required to get started.
Apply today to see if you qualify for a Fundbox financing and get faster access to the capital you need to accelerate the growth of your business.
Fundbox offers working capital and spend management solutions to help small businesses optimize cash flow. If you'd like lending support or education make sure to check out Fundbox's Community Group on Alignable. Or, learn more about how to apply with Fundbox directly here.
