Nowadays, working with banks and getting a business loan can be a major hurdle or stress free mainly due to the tight lending standards by banks. Not only, you need to have business plan with good strategy before applying for the loan, but obtaining outside financing is often necessary to start or grow a business or cover day to day expenses. Here are some of the effective tips to get a business loan in just few steps that include:
- Identify why you need the money
- Find the right loan
- Find the best lender for you
- See if you have what it takes to qualify
- Get your documents ready and apply
Identify why you need the money
This one is the most important question the bank will ask, and your answer will likely fall into one of following options including to start your business, to manage your day to day expenses, to grow your business, and to have a safety cushion.
Find the right loan
You have to decide which type of loan is right for you and your reasons for needing the loan will dictate the type of small business loan you get. For example, if you’re starting a business, it’s virtually impossible to get a loan in your running first year because banks or company require cash flow to support repayment of the loan, so start-ups are typically immediately disqualified from financing.
Be Careful About Choosing the Right Lenders
You can get small-business loans from several places, including banks, non-profit micro lenders, other company and online lenders. These lenders offer services including term loans, lines of credit, and accounts receivable financing. But choosing banks will be the best option only when you can provide collateral, you have a good credit, and you don't need cash fast.
Find out whether you are qualifying or not
The best way to find that is your place on the credit spectrum that will determine which loans you will qualify for, plus you need to have been in the business at least one year to qualify for most small business leans and at least two years to qualify for most bank loans.
Finally, gather all your documents
You will need to submit a combination of the following documents with your application that includes:
- Business and personal tax returns
- Business and personal bank statements
- Business financial statements
- Business legal documents (e.g., articles of incorporation, commercial lease, franchise agreement)