When you have an idea for a small business, you want to get it off the ground as quickly as possible. Unfortunately, the process of applying for a standard business loan doesn’t make for a speedy process. Before you apply for a loan, it helps to understand how the process works and what you can do to speed it up and ensure you’re approved.
Know How Much Money You Need and Why
One of the first questions a lender might ask is how much money you hope to receive and what you intend to spend it on.
Determine whether you’ll use the money to purchase inventory, start relationships with vendors, rent a commercial storefront, or hire employees, or if you just want to start building your company’s credit history.
Regardless of why you want the funding, be sure you take time to calculate how much your needs will cost. Avoid guesstimating, as it makes you appear to be less than invested in your business idea.
Research the Types of Loans
Business loans are not one size fits all, which means you need to know which type of loan is most likely to meet your needs.
It can be very difficult to get a traditional bank loan in the first year of a startup, unless you have your own wealth to fall back on and an excellent personal credit history.
Startup owners are more likely to take out business credit cards or personal loans to get their businesses off the ground.
Gather the Documents You’ll Need
Just like every loan won’t fit your needs, not all loans require the same type of documentation.
According to https://www.quickloansdirect.com/business-loans/, all they require for a same-day business loan application is a copy of 3 months bank statements. Not all lenders make it that easy.
Typically, you will be asked for your business statements, personal credit statements, any tax records, and a list of your expenses up to date. Easy place to store and access these documents are online free PersonalCapital account, which links with all other financial accounts.
To be extra sure that you have what you need, ask the lender if you need anything special before you meet with him or her.
Create a List of Collateral
Starting a small business will require you to put up collateral when you take out a loan. After all, lenders want to protect themselves in case your company doesn’t make enough money to allow you to repay the loan.
Whether you use business assets or personal assets, consider what you have of value.
This could be vehicles, buildings, or land. However, avoid putting up a vehicle if it is the only one you have, and never put up your family home.
Compare a List of Lenders
As stated, most startup companies don’t qualify for traditional bank loans, but that doesn’t mean you can’t try.
A bank might be the right choice for you if you have time to wait, have great personal credit, and can offer collateral.
On the other hand, a micro lender may be helpful if you need a smaller amount of money (typically less than $35,000) and your business is too new for a traditional loan.
Finally, there are online options.
If you don’t have collateral, haven’t been in business long, or need to get funding quickly to get your idea off the ground, you might consider an online lender.
Verify the Lender
Before you sign on the dotted line, it is important to thoroughly research the lender you decide you want to work with.
A good financial company will be licensed, insured, and in good standing with your state or local lending authorities. It will have an excellent rating through the Better Business Bureau and any industry-specific rankings websites.
Even Google and Yelp! reviews can come in handy when it comes to determining how current and former clients view your potential lender.
Remember, you’ll want a financial expert who is knowledgeable about your industry, willing to answer questions, and doesn’t rush you to sign a contract before you’re ready.
Don’t forget to ask about important information, including what the interest rate is, when your payments will be due, whether there are any hidden fees, and what happens if you cannot make a payment on time.
Starting your own business has the potential to change your life, but only if you do it the right way.
While it’s probably true that you want to get your idea off the ground as quickly as possible, taking time and doing due diligence to work with the right lender to meet your needs is essential.