Are you in need of extra capital? Perhaps you’ve just received a large purchase order that you’ll need additional cash to fulfill. Or maybe local or regional economic uncertainty is taking a bigger bite out of your margins than anticipated. A business loan may be necessary, but applying for one may feel overwhelming, especially if you’ve never done so before. However, you can successfully apply for a business loan by thoroughly researching your options, organizing your financial records, maintaining impeccable credit, and demonstrating your repayment ability.
Apply for the Right Loan
If you don’t carefully review the eligibility requirements or loan terms, you may waste time applying for loan products for which you do not qualify or that don’t meet your needs. Or you may find yourself applying for a large loan that has hidden fees or charges or onerous repayment terms that put you behind the eight-ball. Research your options thoroughly to find the right loan for your business.
Organize Your Financial Records
Banks and other lending institutions want to easily assess your ability to repay your loan at the terms they establish and ask for your balance sheet, income and expense statements, and tax records. If you use accounting software to manage your financial records, you may want to hire a third-party accountant to ensure you have professional and objectively accurate statements to present.
Maintain Good Credit
Prospective lenders will also want to use your credit score and history to assess your risk. Check your credit reports to ensure that each shows a record of you making on-time payments. If you have delinquent accounts, bring them current, and make on-time payments for at least a few months before submitting your loan application. When applying, only submit one application to one lender at a time, as too many applications in a short period can reduce your credit score.
Demonstrate Your Repayment Ability
Lenders will assess how much cash flows into your business to determine whether you will be able to make payments on time. Before you apply, reduce unnecessary spending, and pay off any installment loans you have if you can. Doing so will help demonstrate that you’ll be able to make the required minimum payments on your loan.