Getting a business loan: a quick overview of how to prepare for the application process
It’s no secret that business loans aren’t easy to get – especially for smaller businesses with no credit or bad credit. There are various options available, however, and once you’ve decided which solution is right for you, you can start preparing. Getting a business loan can help your company grow, expand, improve marketing efforts, fund new product research and development, and more.
Is your business creditworthy? Ultimately, lenders decide whether to grant a loan based on the borrower’s risk profile and credit history. They will look at factors such as:
• Credit report and score
• Assets in the business
• All outstanding loans and cash flow
• Your investors
• Years in business
• Financial statements
If you are just starting out or your business does not have the best credit history, it will be more difficult to get a loan. You will most likely have to provide something as collateral and you will have to deal with higher interest rates. This is also one of the reasons why you should submit a list of your assets for lenders to review so they know what to do if you end up defaulting on your loan.
Financial review when getting a business loan
Your cash flow and outstanding loans will be reviewed to determine if you will actually be able to pay back current loans you already owe AND any new loans they may give you (plus interest).
You will need to determine how much money you will need to ask for and why. Every dollar you ask for must be justified. As mentioned above, there are various reasons why companies are interested in obtaining a business loan, whether it is to manage day-to-day expenses or to invest in new equipment. You don’t want to just “guess” how much you’ll need, or you could end up with more debt than necessary or less money than you actually need. It will take some time to calculate everything based on detailed cost estimates and the amount you can afford as monthly payments plus interest.
If you haven’t done so in a while, be sure to check your credit. If your business is already established and you have borrowed money before, you will have a business credit score. If you haven’t been in business for a very long time, check your personal credit score, as startup lenders will likely want to see it.
This information will help you get started getting a business loan. It is a good idea to go through US Business Funding as the site will help you find the funding you need and has a 95% approval rating.
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