If you have plans of starting a new business or growing your existing company, then you will need funds to do so. Business loans are usually the best option for this because this can be an effective and instant way to get access to large sums once you have been approved, and you do not have to give anything equity in return. While business loans are a great option for starting or growing a company, the application process can be stressful and challenging, especially if you have not done it before. Here are a few tips for applying for a business loan which should make the process easier.
Check & Improve Credit Rating
You will need to have a good credit score to get approved for a business loan. This means that you should check your score as early as possible and take steps to improve your rating if necessary. There are different ways to do this:
- Registering to vote
- Removing errors
- Paying bills on time
- Using credit for small amounts and often
- Ending negative financial links
- Not applying for too much credit
Get Documentation Ready
One of the more stressful aspects of applying for a business loan is getting all the documents that lenders want to see. If you know what documents you need in advance, this will help to reduce stress and allow you to provide what is needed quickly. Typically, you will need to provide:
- Several months of bank statements
- Corporate tax returns
- Individual tax returns
- Outstanding credit account statements
- Balance sheet
Get Connected with The Best Lenders
You will want to get connected with the best lenders so that you can get approval and the best rates. Companies like biz2credit.com can help entrepreneurs to get connected with the best lenders through an easy-to-use online portal and help to make the process much easier and less stressful.
Decide on A Loan Program
It is important to know that there are several types of business loans to consider, and you will need to find the right one for your business and circumstances. This means that you need to research the following:
- SBA loan
- Business line of credit
- Equipment financing
- Merchant cash advance
- Unsecured business loan
- Business acquisition loan
Work Out How Much & Ability to Repay
You will also need to calculate how much you need to borrow and what your ability to repay is. You can do this by working out your Debt Service Coverage Ratio (DSCR) – this is the net operating income divided by total debt service. This metric can usually determine the amount that you can afford to repay, and it is one which a lender will use when considering your application, so it is helpful to know in advance.
These tips should hopefully help to make the loan application process a little easier and allow you to get the funding that you need to either start or grow your company. Business loans are an excellent form of funding, but the application process can be tricky, and preparation is key for approval.