No one can deny the fact that small businesses have a harder time qualifying for financing than larger companies. If you’re a small business owner thinking of applying for a business loan in 2019, make sure that you can maximize your chances of getting credit approval.
Here are five simple steps you can do to up your chances of qualifying for a small business loan:
1. Establish the fact that your business generates stable cash flow.
The money your business generates is the key predictor of your business’ future health and prospects. Having a steady revenue stream assures lenders that you have ample cash to pay creditors, employees, and others on time.
When you apply for a loan, make sure to show a predictable cash flow to your lenders by providing tax returns, bank stateSmall Business Financingments, and financial statements. This gives lenders an idea of the overall liquidity and performance of your business.
Potential lenders may ask you about fluctuations in cash flow, more specifically, the reasons why it may have dipped. Was it because of the recession? Or because of the loss of customers? Make sure to prepare explanations beforehand.
2. Have a manageable debt load as you apply for a business loan in 2019.
Lenders want to know that you’re able to handle your current debt load while paying for a loan. When applying for a small business loan, you must be able to explain how incurring additional debt would be beneficial for your business.
You can demonstrate how your business will benefit from the loan, and you forecast added revenue brought about by the funding. It’s important for lenders to know how your business plans to use the loan.
3. Sustain a favorable payment history.
One of the primary factors lenders consider is a business’ payment history. A business must be able to provide a record of paying down debt on time. Lenders may obtain your business’ credit report from a third party. You can ask them to see and verify the accuracy of the information.
You can provide references from significant trade partners and other lenders who would put in a good word for you regarding your payment history. You can add their contact information as well.
4. Prove a sound business judgment.
Every business experiences challenges along the way. Potential lenders want to know that your business not only anticipates these challenges but also have a concrete plan on how to resolve them. It’s definitely an added bonus if you have management in place to help overcome these obstacles.
It also helps to have a business plan that contains at least two scenarios: (1) how your business will perform if the loan isn’t approved and (2) how it will perform if it got approved.
5. Compare different lending companies.
Don’t assume that banks or private lenders will offer the best terms for your business. Make sure to compare rates, fees, lease terms, and options before zeroing in on a lender for your business.
If you want to know how to apply to apply for a business loan in 2019, contact SMB Compass. We help small business like yours to get the funding and advice you rightly deserve. Don’t hesitate to give us a call at (646) 569-9496 or email us at [email protected].