The Great Recession took its toll on businesses around the world. It made it increasingly more difficult for businesses to get loans. Banks, credit unions and other financial institutions have been much more hesitant to lend money to companies without the right actuarial data. The credit crunch has eased a bit, but some experts are warning that a new one is on the horizon.
Fortunately, it is still possible to get a loan for your small business. However, you need to take the right steps.
Getting a Small Business Loan is Still a Possibility in 2019
Are you looking to get approved for a small business loan? Whether you have a great business idea and you are looking to launch a company or if you are simply looking to grow your existing brand, a business loan is a smart way to get the funds that you need to go about doing this. Having enough money is vital for success, but how do you get approved?
Unfortunately, getting approved isn’t as easy as you would hope. The approval rate for small business loans in March this year was only 27.3%. That may not sound very high, but it is actually the highest rate in the last couple of years. This means that getting a loan can seem like an uphill battle. However, that isn’t the case if you do your due diligence. Here are some steps that you need to take.
Build Credit Score
Much like a personal loan, a lender will look at the business credit score in order to determine whether you will be a reliable borrower. This means that you need to check your business credit score and take steps to improve this if necessary. This could involve paying bills on time, using credit little and often and registering your business with a credit reference agency. There are four different types of small business credit scores, but the Dun & Bradstreet is the most commonly used. Make sure you know what your scores are.
Have a Detailed Business Plan
A detailed business plan is key for getting approved because this shows how you plan to use the money and how it can be repaid in the agreed timeframe. This will give the lender confidence in your company and your ability to make the repayments.
Legal & Financial Documents
It is also likely that you will need a range of legal and financial documents. These might include tax returns, balance sheets, bank statements, business licenses, articles of incorporation and commercial leases.
Collateral
Some lenders may also require that you put up collateral to protect them if you default on payments, such as property or inventory. Other lenders may simply require a personal guarantee that the loan will be repaid even if the business enters financial difficulties.
Alternative Forms of Funding
Small business loans can be an excellent way to get the money that you need to help your business to succeed, but they can be hard to get approved for especially if you do not have a great credit rating. This is why alternatives like a business cash advance from specialists like Liberis is on the rise. This is a form of unsecured funding which does not require collateral to get approved for. Repayments are based on a percentage of the company’s monthly card takings which is ideal if your business is impacted by seasonality.
Every small business requires funding either to get up and running or to grow the company. Small business loans can be a smart way to go about doing this and these are the main steps that you will need to take to get approved.
Do Your Homework and Getting a Business Loan Shouldn’t Be a Hassle
There are a lot of factors to look at when getting a business loan. It isn’t as easy as it used to be, but you should be able to secure funding if you know what you are doing. Make sure you have the right financial documentation and pitch your request carefully.