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Money and financial planning, young hispanic self-employed woman checking bills and doing budget with calculator, computer and papers in fashion design studio
Every business aims to grow; an influx of money helps a business move forward towards its goals. Obtaining a small business loan is a prodigious way to finance the progress and expenses of a business. However, there are certain crucial aspects that one should contemplate before applying for loans.

Getting a business loan is not essentially an intricate process. However, if you are better prepared for it, your chances of approval are heightened. Following the basic steps and electing a lender that focuses on small and medium enterprises can make your business funding quite simple. There are many different lenders who offer small and medium businesses the opportunity to grow by offering them friendly terms on loans. Here are some of the essential steps that must be followed when applying for a business loan.

Small Business Loan – Essential Steps

Create a Sold Business Plan

Whether your business has just appeared on the market or has been around for a while, a solid business plan is important to convince lenders to issue a loan. It states the key aspects of your business and what your business is all about. Your mission and goals must be clearly mentioned in the business plan; this allows the lender to assess the nature and potential of your business. Your business plan must highlight how your company plans to pay back their small business loan in due time with interest.

Many business owners are tempted to skip this step as they consider it to be an unnecessary burden. Don’t make that mistake. Put some effort into noting every facet of your business plan in detail and update it as time goes by.

Spotless Accounting Records

As important as a business plan may be, your accounting records are also an important measure of your financial standing. Lenders will imperiously look into your balance sheets, income statements, cash flows, and other financial records to assess riskiness before offering you a small business loan. Apart from financial sheets, they will also see if the company is making any profits and look at their debt ratios to see how the business has performed in the past.

If something is missing in the records, you have no way of proving that it exists or existed and the loan officer looking at it will not be convinced to hand out a loan to you.

Maintain and Track your Credit Score

With the growth of many online lending options and other means to secure loans, lenders are thinking outside the box to verify the credibility of loan seekers. However, a credit score still remains one of the most crucial aspects in determining the worthiness of a business. A score of 700 plus is considered to be excellent, while 600 plus still offers you plenty of options. Below that, you have limited options and ,depending on the case, a small business loan may be approved.

Some people have no idea what their credit score is because they haven’t bothered to check it in a long time. It can be a big mistake because your credit score is still considered to be the most reliable factor in assessing the riskiness of an individual or a business. Therefore, ensure that your credit score doesn’t go haywire and track it often.

Determine the Use of the Loaned Amount

Disclosing what you will be using the loan amount for may sound like something personal you are not willing to disclose, but it can be very advantageous for the approval of a small business loan. Small businesses do not usually have a market reputation, therefore, lenders might be unsure about your plan of action. Telling them how you plan to use the loaned amount will help them to evaluate the expected profitability of your business, which ultimately means that you are able to pay back the loaned amount. Lenders have a team of experts who are adept at handling a variety of clients with multiple declared purposes for a loan. These experts usually make accurate predictions about the future of a business.

Following the above-mentioned guidelines to obtain a small business loan will increase your chances of approval. It is best to declare honest information about your business in order to ensure that you do not land in any trouble later on.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

 

Application form  for a small business loan with stack of 100 US dollar bills and calculator
The world of acquiring finances for a small business has changed and the process of getting a loan can be quite nerve racking. The initial phase prior to getting a loan requires you to know which documents to prepare, how much financing to ask for, and, most importantly, which lenders to approach. The following are some of the steps that you need to know about in order to qualify for a small business loan.

Establish Why You Need a Small Business Loan 

Identify why you need the money and pin down the list of reasons on how this loan will help your business. There can be various reasons such as getting a loan to launch a new business, buy an existing business, purchase a piece of equipment, or for your day to day working capital to pay for marketing or human resource costs. Moreover, you may need the loan to cover your cash flow gaps or perhaps an opportunity has arisen to expand your existing business. The key is to recognize and evaluate your reasons as it will help you to decide the choice of the lender and loan type.

Determine How Much Financing You Require and How Much You Can Afford

 A small business loan can be helpful in many ways, but it is essential to know the amount of capital you need in order to achieve your business goals. It inevitably does not have to match up with how much you can afford. You can use a business loan calculator that will help you evaluate the monthly expense of your loan, which is essential to know before you sign a loan agreement. Another way to find out how much financing you need and how much you can afford is to conduct a loan performance analysis. By conducting this analysis, you will able to calculate the correct amount to move ahead with your business loan.

Explore Diverse Types of Business Loans

Find the right loan. Choose a type of business loan based on your needs. The key is to know which type of loan matches with your credit score, your budget, and the reasons why you need the financing in the first place. You can get small business loans from several places including banks, financial institutes, micro and online lenders. 

Furthermore, common types of bank loans include equipment financing, short term loans for 2-3 years, or long term commercial loans which are usually secured by real estate. One of the most common loans among small business owners is a line of credit. They make a great security net in case of an emergency, thus offering an amount of capital that can serve as a cushion for your cash stream.

Collect All Loan Documents

Once you have compared your options on the different types of business loans, it’s time to put your documents together. Depending on the bank and type of loan, you will need to submit a combination of documents such as business and personal bank statements, tax returns, annual revenue, financial statements (balance sheet, profit loss statements) and other legal business documents. The best thing you can do is sufficiently organize all of your documents to submit with your loan application and be as prompt as possible.

Apply for your Business Loan

Once you have prepared all of the documents, you can submit your loan application. It is advisable that you don’t apply for more than one or two loan types as this will affect your credit score in the long term. After you have submitted your loan application, it will take a while for your lender to review all of your documents and verify the authenticity. Once your application is approved, before signing any papers, make sure that your lender informs you about the loan and its complexities. 

For small businesses, getting a business loan is often a difficult obstacle to overcome, mostly due to tight lending principles made by banks. Although applying for and getting approved for loans can be tricky, if you prepare your application well, the probability of receiving the loan amount will be higher.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.