When it comes to business funding, in most cases doing it now is better. This is because sometimes later becomes never. But often big plans also require big money that doesn’t necessarily exist in your bank account. And that’s where a business loan can be a real savior.
Regardless of the stage of growth your business is going through, there is going to be a time when a little extra cash can come in very handy. Especially, now more than ever, a business loan has become a particularly important method of funding as many businesses struggle to crawl out of the Covid-19 crisis.
While there might be other methods to fuel growth and fund operations, a business loan is one of the most sought methods of funding. However, it is important to understand what your bank expects of you throughout the application process beforehand to make the process easier to wade through.
How to Get a Business loan With Ease
Read on to learn how to get a business loan to help your business meet its financial goals!
Put Together a Solid Business Plan
First and foremost, your bank or lender would want to be sure that you have a strong financial plan for your business, especially if you are just getting started. A solid business plan will offer a thorough introduction about who you are and what your business is to the lender.
Your business plan should include the financial goals of your business, mission and a plan to achieve all the stated objectives. The key to a great business plan is to be able to convince the lender that your business is likely to succeed.
Determine How Much Money You Need
The next important thing is to figure out how much money do you need from a business loan. Before you apply for a loan, do a thorough research to make sure that the amount you require is not underestimated or overestimated.
While an underestimate can lead to future financial problems, an overestimate can make the lender question your business plan and research. In order to steer clear of all of these shortcomings, make a comprehensive budget with proper financial projections.
State the Reasons to Get a Business Loan
Another important thing that a bank will be interested in is the reason to get a business loan. Lenders want to know how the applicant wants to spend the borrowed funds. So for instance if you need funds to purchase equipment, an equipment loan is all you need. Similarly, if you want a loan to fuel business operations, a short-term loan would be a sound idea. Therefore, you must know the reasons to get a business loan and you should state them clearly to have a better shot at qualifying for the loan.
Know Your Credit Score
Before a banks decides to lend you any type of loan, they first verify if your financial condition qualifies for a loan. And this is determined by your credit score. It is best to check your credit reports and scores before you apply for a loan. So if you don’t qualify for a certain type of loan you can apply for the one your condition qualifies for.
For instance, a credit score of 700 and above is great but if it falls below 680, you probably wouldn’t qualify for a business loan. In such case you can go for a revenue based loan instead. However, if your score is even lower, you would have to improve it before applying for any loan.
Here is a credit score checker that’ll come handy.
Find Out the Right Options
Once you have thoroughly checked your credit report and you are sure you qualify for a business loan, make a list of potential banks or lenders that can extend this method of funding. Determine the type of loan that will be best suitable for your needs and financial goals. Next, choose the lending option that you can get at low interest rates and offers the most flexible approval guidelines.
Maintain Proper Financial Records
The process of getting a business loan becomes much easier when you have proper financial statements. It is a crucial step in the verification process of banks to check the balance sheet, cash flow statements and income statements of the applicant to determine if the business has the ability to repay the loan. So if have not maintained these financial records yet, it is time to get started to increase your chances of getting an approval for a business loan.
A business loan helps you survive a slow season, provide funds to buy essential equipment or expand operations. But getting a business loan isn’t a walk in the park.
Imagine yourself on the other side of the desk for instance. If you are asked for a business loan, there are some things you want to be sure of before you lend money to someone. This includes knowing the reasons to get a business loan and what the chances are that the borrower would repay the loan in full and on time. So that’s exactly what your lender expects to know about you when you apply for a business loan yourself.
By following these above tips on you can greatly up your chances of securing a loan. The trick is to be prepared and well-planned for it.
If you are struggling to manage the money matters for your business, download the Doctor Money app today. Not only will it offer you smart solutions to money management, but it can also help you tackle your debt and meet your financial goals.