Small business loans are the lifeblood of many small businesses. They can provide the cash you need to keep your company growing and succeeding. However, getting approved for a small business loan isn’t easy. In most cases, lenders want to see that you’re a responsible business owner who has everything planned out before you ask them for money. Not only that, but they want to see that your business is stable and that you have something to guarantee repayment in case anything goes wrong. Even though this might sound like bad news, it’s good news because it means that if you prepare with these 5 pro tips, you will get approved for your small business loan!
1. Be ready to prove you can repay the loan
Lenders aren’t just going to hand cash to anyone who walks through their doors. Instead, they will want to see that you have something to guarantee repayment.
For the most part, this means you’ll have to put up some collateral property (real estate or stocks are the most common). However, you might be expected to put up a cash deposit or even sign a promissory note. You’ll have to decide what you’re willing to do to get the money you need. Remember that if you can’t repay the loan, you won’t get the money you need to keep your business afloat!
2. Have A Solid Business Plan
One of the first things lenders want is for you to have a solid business plan. This doesn’t have to be more than a couple of pages, but you need to outline why you’re in business, who your customers are, what your goals are, and how you’re planning on achieving those goals. You can even outline your plans for getting new customers and expanding your business if you’re applying for a loan that will let you do that. Having a business plan that lenders can look over will show them that you have your business future planned out and know what you’re doing. It’s a great start towards getting approved for a small business loan.
What should a business plan include?
- The executive summary
- A description of the business
- The market(s) the business will operate in
- A SWOT analysis
- Management team and personnel
- The products or services offered
- A financial plan
3. Set Aside An Emergency Fund
Unfortunately, things happen in business. You might have a customer who stops paying their bills, a supplier might not send you the products you need, or you might lose one of your top employees. You never know when something unexpected will come up, putting a wrench in your plans. That’s why you need to set aside some money for an emergency fund.
Lenders will want to see that you have some money set aside if something goes wrong. You don’t want to use all of your profits to pay for things and then be left high and dry when something unexpected happens. Instead, you should set aside some money to cover the unexpected expenses that are going to come up.
One of the things that lenders will look at is your track record when it comes to managing your money. This means that lenders will look at your credit report and see how you’ve managed your account in the past. They’ll look at things like how many times you’ve applied for credit in the past and if you’ve repaid those loans in full and on time.
If you’ve applied for a loan in the past, and you’ve missed payments or failed to repay the loan, this might make lenders less likely to give you a loan. That’s why it’s important to set aside an emergency fund. This can be anything from $1000 to $5000. The amount that you set aside depends on your business. If you run a business with a high risk of failing, you might want to set aside a little more. This is because if something goes wrong with your business, you’ll want to have a little bit of money set aside to repay your loans, such as credit cards and loans.
4. Show What The Money Is Going To Be Used For
Lenders want to see that you have an emergency fund built up and that the money you’re asking for will be put to good use. They want to know how it will help you succeed by smartly expanding your business.
Lenders want to see that you’re not wasting their money and making a smart investment in your company. You can do this by outlining what the money is going towards and how it will help you succeed. Is the money going towards hiring more employees? Is it going towards purchasing new equipment? Is it going towards marketing and advertising? Whatever the funds are going towards, make sure you outline it in your small business loan application.
5. Prove That Your Business Is Stable And Growing
The last thing lenders will look at is that your business is stable and growing. This means lenders will want to see that your business is stable and that you’ll be able to repay the loan promptly. One way to prove that your business is stable and growing is to create a profit and loss statement.
Having a profit and loss statement will show the lender how much money your business is making and how much money you’re spending. Another way to prove that your business is stable, and growing, is to have a list of your assets. This can include your inventory, business equipment, cash in the bank, and anything else. A list of your assets will show your lender that you have something to guarantee repayment in case anything goes wrong.
Now that you know what you need and how to get it, there’s no reason you shouldn’t be able to get approved for a small business loan. Just remember that you need to be ready to prove that you can repay the loan, have a solid business plan, and show what the money is going towards. If you do that, you should have no problem getting the cash you need to keep your company growing and successful!