Are you hoping to buy new equipment for your company? Do you need to invest in a software upgrade for your computer system, but don’t have the money? These are two good reasons to consider applying for a loan. But before you do, there are some things you will need to have in place to make the loan application process more fluid and to ensure approval. Here are some guidelines:
SOUND BUSINESS PURPOSE? – Do you need to take out a loan for a sound business investment? If you answered yes, then that’s your first step to getting a small business loan. Different banks and lending institutions have different factors for lending, but all must be used for a sound business purpose, such as equipment upgrades or facility improvements.
HOW’S YOUR CREDIT HISTORY? – Banks don’t want to lend money to people who can’t pay it back or who have missed payments in the past. Loans are more likely to be approved if the applicant has some kind of collateral and a good business or personal credit history. If your have a lower than average credit score, you may have to turn to business credit cards to repair prior bad credit history.
ACCOUNTING – The loan process can be a lengthy one and may require a lot of paperwork. Be prepared to provide banks with both your personal and business credit history, a detailed business plan, financial statements for any start-ups, projected financial statements, cash flow and profit and loss statements and possibly a personal guarantee. If you have all of your accounting in order, the process will go smoother and faster.
MICRO-LOANS – Some non-profit organizations, like the Small Business Administration or SBA, grant small business loans ranging from $5,000 to $5 million dollars. The SBA also offers a Small Business Administration Micro-loan through the non-profit organization, Accion. These are smaller loans up to $50,000, which are given to start-ups owned by minorities or women. These are great sources of money for those with bad or no credit history because the application process is more lenient.
According to the SBA, the average business loan is about $300,000. Getting a loan takes some work, but banks and lending institutions are more likely to lend now that the economy is getting better.
If you need help getting your bookkeeping in order to apply for a small business loan, call or e-mail me or reach out to anyone on my team; we are here for you. You can also check out www.sba.org for more information.
