Starting a small business on your own is no doubt expensive. You need a budget for a workplace, employees, production, marketing, taxes… basically, a lot of overwhelming money-dependent factors. Unless you somehow have the finances for all of this, you are probably seeking a small business loan. Believe it or not, there are ways to prepare for this loan and avoid being turned down. And no, they do not include becoming a new person and starting a new company – you can actually do this as you are, with a little bit of extra knowledge.
The first step is to come to the table organized. If you know what you want and prove yourself serious and educated about applying for this loan, you will be taken seriously in return. Come prepared with a balance sheet of your company’s assets versus its liabilities as well as one listing your tax returns. You may also need bank statements, your business license and registration, or other important documents. Be up-front about these documents in order to convey an initial sense of honesty to your lender.
Next, you will want to improve your cash flow. The bottom line is, you will be more likely to score a small business loan if the lender is under the impression that you can afford to pay them back in the future. Demonstrate this by getting customers to pay you sooner – perhaps by offering an early pay discount.
Another important step is strengthening your business credit score, which reveals your risk of repaying a loan back. Once you find your report through Dun & Bradstreet, Experian, or Equifax, you will need to take the time to analyze your credit report. There is always a chance that errors were made, and they could be harmful to achieving your small business loan. Fortunately, errors such as these can be refuted through a simple email or phone call.
The next step is to present a detailed credit plan to your lender. This plan will outline all the specifics of what happens with your credit regarding customers and their payments to you. This plan demonstrates your ability to check the credit of potential customers before working with them. This is important to your lender, because if you are not paid, your lender will in turn not be paid. From here, you can create and adhere to a credit policy defining payment terms, credit limits, and so on.
The final step to securing a small business loan is the easiest – start a relationship with your lender! If you are a friendly and trustworthy face, you are more likely to receive a loan. It is as simple as that.