Is Your Business Ready for a Small Business Loan?
Starting a business can be one of the most exciting and exhilarating experiences of your life. If you’ve always dreamed of being a business owner, you’re likely feeling energized and ready to jump right in to find financing to make your dream a reality. However, there are several important factors to consider before applying for your first small business loan.
Meet the Credit Requirements
Most lenders have slightly different criteria, so you’ll need to gain a solid understanding of what your lender is looking for before you apply for the loan. If this is your first small business loan, the lender might take a look at your personal credit history to see if you’ll qualify. After you’ve built up a business credit history, this will no longer be the case, but it’s vital to have an excellent personal credit score if your business is not yet established. When you’re applying for a loan for your business, you might not think that they’ll look at your personal credit report, and this catches many applicants off guard. Before applying, ensure that you’ve taken the necessary steps to pay down debt to under 30 percent of your total credit limit and be absolutely positive that you make payments on time and in full.
Prepare a Loan Package
When you’re seeking a small business loan to gain access to the capital that you need, you’ll need to approach the lender with a loan package in hand. Showing up prepared is the first step in making a good impression and convincing the lender that you’re worthy of borrowing money and being responsible. A loan package typically includes a detailed business plan that includes up to five years of financial projections. In addition the business plan, the package should include your application and business registration. When you walk into the lending office looking polished with your complete loan package in hand, you’ll only increase your chances of landing the funding.
Think About Answers to Lender Questions
Before you meet with the lender, start preparing a list of answers to questions that he or she might ask. For example, a common question is how you’ll use the funding from the loan. While the answer to this question might seem like a no-brainer, it can be a little daunting to meet with a lender face to face. To avoid being caught off guard from unexpected questions, take a little time a few days in advance to research questions that they might ask and prepare short, well thought-out answers.