Having your own business can be difficult. And, as you know, you’ll probably need outside funding for some or other reason. Whether you need cash to cover costs, to finance growth or for some extra working capital, a small business loan is unavoidable and the process can be quite daunting, especially if you are a new small business owner.
Not to worry, we’ve got five of the best tips around to ensure you have what it takes to knock any lender’s socks off.
1. Know the Requirements Beforehand
You’ll need to do some research before approaching any lender or financial service provider. As you will have quite a couple of options on who to approach, you’ll need to know what their criteria is. This can vary from one lender to the next, so it’s best to be prepared. Start by researching the requirements.
Next, you can take a closer look at their procedure and familiarise yourself with it. The more you know, the better you’ll be prepared.
2. Calculate How Much You Need
Next, you need to have a very good idea of the exact amount you will need to borrow. This will almost certainly be part of the application. For this, you’ll need to take a look at your budget, your profit and cost and come up with a feasible amount that will help you reach your business goals.
Something to keep in mind while calculating the amount you wish to borrow is the reason you need to take out a loan.
3. Specify How You’ll Use It
Which brings us to our third point. Lenders are going to want to know the purpose of the loan, and what exactly you plan on doing with the money. As in our second tip, you’ll need to be able to show them the exact amount you need, and what you need it for.
Having a clearly defined goal and need is important as this is exactly what prospective lenders want to see while reviewing your application.
4. Know the Five Cs
While we mentioned in our first tip that you need to familiarise yourself with the lenders specific requirements, there are five things you can be certain of no matter where you want to take out a loan. These are character, collateral, condition, capital and capacity.
Lenders will need to know that you can repay them, that you have a trustworthy character, that you have the collateral to pay them back, that the business is in a great condition and the amount of capital you need.
5. Get Your Credit Score Checked
Lastly, you should have a good credit score, both personally and for the business. A healthy credit score is estimated to be around 700. Before you kickstart the loan application process, be sure to have your credit score checked.
Lenders will more often than not check both your personal and business credit score, and no less than three credit bureaus should verify these.
There are of course a ton of things to take into consideration before setting a date for your application, but these are by far the most important ones. Good luck!