How to Get a Small Business Loan
Every business needs a little help from time to time, and small business loans can provide that help. In order to get a loan, however, you need to show personal financial strength, solid business skills and a high potential for profit.
Personal Affairs
You may not think of your personal credit history as a factor in the bank’s decision, but it is a good idea to know your personal credit score when you apply for a business loan. Be prepared to demonstrate your ability to repay the loan just in case your business goes under or the revenue from your business is insufficient to make payments. You can obtain your credit report for free each year from each of the three credit major credit bureaus. If you space the reports out by ordering one every four months, you can easily monitor your credit report for accuracy and track changes in your credit score.
Business Resume
The process of applying for small business loans is similar to the process of applying for a job. Your potential lenders are not only going to be interested in your personal finances, they are also going to be interested in you as a business leader. Your experience and expertise in your field are good predictors of how successful you and, by extension, your business will be. It is a good idea to show your past successes, particularly in regard to profits made as this skill exhibits the ability to raise the funds that will be necessary to pay back the loan. As companies are not comprised of just one person, you should also be prepared to defend your hiring decisions. Potential lenders want to see evidence of a thriving enterprise.
Repayment Ability
Finally, you need to be able to prove that you will be able to pay back any small business loans that are offered to you. Lenders are not only going to look at your business credit score but also at your company’s financial records, including cash flow and possible sources of income. They must be satisfied that your business has a history of paying its bills on time and that it is profitable. Demonstrate how your business is going to continue to be profitable in the future. If the lenders determine that it is too much of a financial risk, your business is unlikely to be approved for a loan.
If you can demonstrate excellent personal and professional financial records, and if you can show that you have a solid business that is likely to make a profit, you are probably a good candidate for a business loan.