Before the hard strike of the Great Recession, it was a lot easier to get business loans. You have to meet certain requirements before the lender can grant you the loan. Given below are 7 steps that you may want to follow when apply for business loans. Read on.
Develop a relationship with the lender
Before you even need the loan, you may want to develop a relationship with the lender. The main people should get familiar with your business. Keep in mind that lenders like to do business with trust worthy people. So, let them know as much as possible about your business.
Purpose of the money
You may want to decide on the purpose you applied for the loan for. Make sure you are going to get a loan for a good purpose. For instance, you can get a loan to buy equipment, property or software. However, it’s not a good idea to get a loan to finance losses or to get unimportant business assets.
Business needs
You may want to make an assessment of how much money your business needs. If you have a small business, you may not want to apply for a large loan. However, make sure you don’t underestimate the money you need to keep your business running. Both underestimating and overestimating can cause problems down the road.
Credit score
Typically, lenders consider the personal credit of a businessman before granting the loan. So, make sure you have a good credit rating. If you have a bad rating, make sure you work on it to get it in good standing.
Finding the lender
You may want to read up on the type of lender that will best suit your business needs. For conventional loans, you can go to commercial banks. However, their parameters are strict. Non-bank lenders is another option that you may consider. Then there are region specific lenders that include banks and other institutes that are interested in economic development in those areas. Lastly, you can check out crowdfunding websites especially if your capital needs are not over $10,000. For personals, you can also check out peer-to-peer websites, such as The Lending Club and Prosper.
Loan application package
You may want to get the loan application package ready. This includes the documents submitted so as to apply for a business loan. Generally, it includes a business plan, profit and loss statements, balance sheets, and cash flow statements, just to name a few. You may want to keep in mind that lenders may also check out your social media pages while doing their research.
Hang on
Once you have submitted the required documents, you may have to wait for 15 to 30 days for a response from the lender. You can check in on a weekly basis for an update. Usually, lenders may require additional documents before granting the loan.
So, if you have been thinking of applying for a business loan, we suggest that you follow the steps explained in this article.
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