Securing a Small Business Loan: Tips and Tricks
Small businesses have always been the backbone of society. Independent owners bring a wealth of diversity to any economy and range from selling well-known products to specialized niche markets. However, one of the largest struggles that face small business owners is borrowing capital. Yet it need not be a daunting task to receiving a loan. Here are some handy tips and tricks that will be helpful to securing small business loans.
First and foremost, you have to be knowledgeable about the lending process. A lender’s goal is to make a profit. As such, they weigh the calculated risks associated with lending to an individual or entity. A lending institution is less likely to finance small business loans to someone they deem a high credit risk. It is therefore your responsibility to present your business in as favorable a light as possible.
In order to make a favorable impression, you should be aware of your credit history, both of your business and your personal history as well. Creditors will run both. The easiest way to know your credit history is to apply for a credit report from the three major credit bureaus: Equifax, Experian, and Transunion. Consumers may obtain a free credit report once a year, which can either be downloaded for immediate access or mailed to you. Check the report for any inaccuracies or discrepancies that need to be removed. In addition, many banks also offer free access to your FICO score which is update quarterly.
Finally, prepare for to answer questions about your business venture. In anticipation, you should come up with a solid business plan. This will require some research on your part. Some questions to think about when creating a plan are if your business is profitable. This includes understanding the industry you are entering and the competition. You also have to be able to provide some proof, including financial records and banking history, that substantiates that you are able to pay your bills and a contingency plan of what will happen in the event that sales decline or that the business folds. Again, lending institution is less likely to lend capital to a high risk.
It’s entirely possible to secure small business loans if you are properly prepared. Though lenders are very cautious about who they lend money to, following these simple tips and tricks and being well-versed in the process as well as having a good credit history along with a solid plan will increase your chances of getting that loan.