Financing is a fact of life for any business, whether it’s to fund a new start-up, expand/update your existing business, or solve a temporary cash-flow issue. The best way to be successful in getting that loan is to be prepared with all the answers a bank needs to decide in your favor.
Here are 5 suggestions to pave the way to being approved for a business loan.
1. Research potential lenders online
Don’t just consider large commercial banks. Other, possibly easier, options include:
- Smaller regional banks
- Credit unions
- Micro-lending organizations
- Online marketplaces
2. Know your credit history and credit score.
The lender will definitely be checking to see whether you are able to repay their loan. If there are any errors or red flags that you can fix, get it done before they request the report.
Here are some steps you can take
- Pull a fresh credit report online
- Review and challenge discrepancies
3. Obtain expert advice.
There’s no point in flying blind when free help is available for the asking.
- Consult your trusted advisors
- Speak with fellow business owners
Check out episodes of “Shark Tank.” Although the “Sharks” are investors (becoming part owners of the business), not lenders, you’ll get an idea of the questions a loan officer might ask you.
4. Update your financials
Up-to-date monthly balance sheets and profit and loss statements are a great indicator of a business’s financial health. Understanding your historical business performance will give your lender confidence in your business’ direction.
To demonstrate your credit-worthiness, include documentation such as:
- Past financial statements
- Assets you will use to secure the loan, such as a property you own or purchase orders from your customers
- Brochure, website link and other marketing materials for your products/services
5. Choosing the right loan vehicle
In today’s ever-changing business environment, there are many types of loans from purchase order financing to secured, unsecured, lease or purchase. Depending on the type of loan to choose varies based on:
- Desired end result
- Interest rate importance
- Terms of the loan
If you need help putting together the financial plan for your loan application, your dedicated Xendoo CPA team can provide you with your balance sheets, profit and loss statements, tax returns and more. Let’s get started!