Is it time to finally expand your business? Whether you want to hire more employees, move to a bigger location or launch a new product line, you’ll need some capital. Many business owners want to get a business loan, but they’re not sure if they meet the requirements. Read on to find out what you’ll need to secure financing for your business.
1. Know Which Type of Loan is Best for Your Needs
Before you apply for a business loan, you should know what type of business loan to look for. There are plenty of lenders out there offering a variety of loans. Take some time to determine if you want a peer-to-peer loan, a platform loan, a traditional loan, or some kind of combination of these types of loans.
2. Dust Off Your Old Business Plan
It’s good form to have a business plan, but if you’re going to be applying for business loans, you’ll definitely need one. Most lenders (especially banks) will want to see an up-to-date, professional business plan. If you don’t have one, the lender won’t trust that you’re responsible enough to pay back the loan.
While some lenders won’t need an actual business plan, many will still ask to see certain documentation, like your online presence and business statistics. These items will help the lender determine how much they’re going to give you.
3. Polish Up Your Résumé
Business owners may not think they need a résumé, but lenders will be interested in seeing your qualifications, plus the qualifications of any executive officers of your company. If necessary, hire a professional to write or update your résumé. When drafting your résumé, think of the information you need to include to transform your company into the one you want to be running.
4. Profit and Loss Statements
Just like your business plan, you should already have profit and loss statements. These monthly statements are like taking the pulse of your business. If you don’t already have them, use an accounting tool to get your statements up to speed.
5. Good Credit
The trickiest part of getting a business loan is getting an affordable interest rate. Luckily, the better your credit is, the more likely it is that you’ll get a low rate and a good deal on a loan. Shop around for the best rates and consider all types of loans, including platform lending and traditional bank loans. Keep in mind that your FICO credit score plays a big role in the offers you’ll get.
If you have time, improve your credit score before applying for loans. Keep in mind that lenders will be looking at your personal credit and also your business credit if your company has been in business for at least one year.
It’s not uncommon for a lender to want you to have assets that will secure the loan. For businesses, the office equipment, real estate or machinery can serve as an asset. Intellectual property or stock can also be considered an asset. While collateral isn’t required for every loan, it may help you get a better rate or help a startup secure a loan without business credit history.
Now that you know the basic requirements for getting a business loan, you can approach the loan application process with confidence. Understanding the different loan products available allows you to choose your lender based on the type of loan you need.