Getting a loan may seem a simple task, but for someone who is relying on it for the success of their business, it can be a mammoth, pressurised task. To put your mind at ease, we have put together a simple list of steps to help you understand just what you need to do. The process of getting a small business loan involves five major stages:
- Decide on Your Lender
One of the first things you have to do is decide on who you want to provide you with your loan. There are various factors to consider, such as interest rates, repayment periods, etc. If you have a particular lender in mind, try to build up your relationship with the bank and loan official you’ll be dealing with. This will help to receive good service and understanding of your unique business needs. You also don’t have to take a loan from a large bank but, with some research, you can find plenty of lenders who specialise in small business loans.
- Apply for the Loan
Now comes the dreaded paperwork. Don’t worry, it’s not as bad as everyone says, the most important thing is to be prepared and don’t submit until everything is ready. You need to decide which type of loan you want to apply for. Then, your lender will ask you for personal information as well as information about your business. It’s best to have a full business plan available for them to browse through and show your business will be successful. This is explained further in step 4.
- Personal Credit History
Your personal credit history is important when applying for your first small business loan. This is because you have no business credit history yet, this is the best option for the lender to assess your ability to pay back what you’ve borrowed. A good payment history, little debt and a high credit score, will improve the chances of getting your loan approved. So make sure to maintain your credit history consistently, it is one of the most important aspects of getting approval.
- Business Plan
The other vital part of getting small business loans approved is your business plan. Your lender will want a detailed document showing all the areas of your business. This includes financial projections, marketing plans, logistical operations, etc. which they will use to assess the potential success of your business. You can hire a consultant to help put your business plan together, or you can attempt to do it yourself if you have a business background.
- Loan Approval
If the lender is happy with all the information you have provided, your loan will be approved, and it can be signed off. You will most likely have to submit reports to your lender to show your financials over time so make sure to keep proper records that are up to date.
Now, with all this in mind, you can go out in confidence and apply for your small business loan and make your vision come to life. Good luck!