Small business owners generally cannot get a loan because it is hard for them to convince investors that they are able to produce enough money in the future.
In order to consider yourself a good candidate for a small business loan, you have to make sure that you meet the lenders’ requirements. However, do you know what those requirements are and what could persuade them to approve your loan? Continue to read the article in order to find out and prepare yourself for the process.
Credit History and Credit Score
Your past, which includes your credit history, is data that the lender uses to create an algorithm and predict your financial future.
If you have a bad credit history report, the chances are that you will not seem trustworthy enough for lender to give you the business loan. This means that you have to clean your credit history and you can do it by identifying the mistakes or discrepancies, collecting the necessary evidence and contact the creditor and make a complaint. If your credit score does not exceed 700, the lenders will turn you down.
Financial and Legal Documents
Generally, lenders require you to present various financial and legal documents including balance sheets and bank statements, income tax returns, business licenses and commercial leases, among others. Moreover, you have to hand out a valid photo ID such as your driver’s license and prove your management experience.
By gathering all these documents and presenting them to the lender, this will show them that you are organized and serious. Expressing your financial projections will also win you points when applying for a small business loan .
Collateral Property
If you want to become a good candidate for a small business loan, then you have to make sure that you are able to provide collateral, namely a real estate or equipment that represents an asset for you in order to back the loan.
This requirement reassured the lender because if your business does not make profit and you are unable to make the repayment, the lender can recover the money by selling your respective asset.
If you want to avoid this situation, which is using your personal property as collateral, a smart move is to create a savings account as a backup plan and prove to the lender that you always think ahead and take the needed precautions.
Detailed Business Plan
Finally, yet importantly, lenders wish to know the details concerning your business plan, assuming that you in order to assess if you will use the loan properly and beneficially.
This also represents a hint that you will be able to make the repayment, especially if you demonstrate that you benefit from enough cash flow that covers your expenses and your loan payment. You must include several aspects in your business plan like a detailed company description, management team, marketing strategy and SWOT analysis. This should satisfy the lender’s request.
