Trying to figure out how to get business loan help can be a challenge.
The tight lending standards implemented by banks makes it very difficult for many small business owners to find the funding they need.
Fortunately, many alternative lenders have stepped in to fill this need.
Whether you are looking for financing to cover daily expenses, expand your business, or make needed upgrades, LendGenius can help you connect with lenders who can help.
Step 1 – Clarify Your Loan Needs
First, you need to be clear on exactly what you hope to accomplish by getting a business loan.
Most businesses find their goal can be defined in one of four key categories.
Clarifying the reason you need funding will also help you determine the type of small business loan you’ll need.
To Start a Business
It can be difficult to obtain a loan in the first year of business.
Most lenders require established cash flow to facilitate repayment of the loan.
This means startups are usually disqualified from financing.
However, you may be able to find a microloan from the SBA or leverage credit cards, personal loans, or crowdsourcing for some of the initial costs.
To Cover Cash Flow Gaps
Many small businesses have a seasonal sales cycle that slows to a crawl for months at a time.
They have busy seasons that provide an abundant supply of incoming cash, but they still have to survive the slow season which may provide less reliable income.
In other business models, companies may not receive payment for their service or product until after all work has been completed.
Waiting for payment during the invoice waiting period can make it difficult to cover daily operations.
To Seize A Business Opportunity
Sometimes when business is going really well, owners will have an unexpected opportunity to expand their business.
This could result as a release of game-changing technology in your industry, or a chance to move into new territory.
Unfortunately, these types of opportunities aren’t written into the business plan and funds are often not available to take advantage of the growth potential.
A typical small business loan is a great place to start to fulfill this type of need.
To Handle Unexpected Emergencies
Every business owner will eventually face some sort of emergency situation within their business.
It could be as a result of a natural disaster, computer malfunction, or a necessary piece of equipment breaking.
When an emergency does occur, it is important to solve the immediate crisis and get back to business as quickly as possible.
Depending on the type of emergency, equipment financing or a business line of credit could be considered.
Step 2 – Next, Calculate the Capital You’ll Need
Many people have an ideal number in their head when they begin to consider applying for a small business loan but they may not know precisely how much they can afford.
First, you’ll need to calculate your Debt Service Coverage Ratio (DSCR).
Lenders use this to determine if the current financial state of a business is sufficient to make payments on the desired loan.
To calculate, you will take your average monthly cash flow and divide it by the expected monthly loan payment.
Alternatively, take the average daily cash flow and divide it by the daily loan payment.
A number above one indicates to lenders that you will have sufficient funds to repay them.
Step 3 – Prepare Your Financials
Most people need business loan help when it comes to preparing their paperwork.
Depending on the type of loan you want and the lender you will be approaching, this can be a significant hurdle.
While some lenders will require more extensive paperwork, the following are required for a typical small business loan.
Know Your Credit Score
Your personal credit score will play a big role in whether or not your business loan is approved.
Businesses that have built a business credit score should also be prepared to have that factored in.
Lower scores aren’t always deal breakers, but a score of above 650 will bring in the best offers.
Time in Business
Another thing lenders will want to verify is just how long you’ve been in business.
Businesses with a history of two or more years will find it easiest to procure a small business loans.
This can be verified with tax statements, letters of incorporation, or other business filings.
Average Bank Balance
Lenders will look at the average bank balance of the business to determine your ability to manage money effectively.
This assures lenders the business will be able to make payments on their loan even if business slows for a month or two.
Most lenders will want to see a minimum average balance of $5,000 – $10,000 but may require higher amounts for larger loans.
You may be asked to produce profit and loss statements.
Lenders will almost certainly want to see the last 60 days but may request as far back as two years.
Tax statements for the previous two years for yourself and the business will show the revenue and how profitable the business has been.
It isn’t always necessary for a business to be profitable to be approved for a loan, but it does increase the likelihood of the application going through.
The more of the documents you have on hand and ready to provide lenders, the faster the process will go.
Step 4 – Get Professional Business Loan Help Using LendGenius
It can be frustrating and time-consuming trying to identify the best lenders to work with – and even then you’ll have to go through their application processes one at a time.
When you apply for your loan with LendGenius, we provide a FREE dedicated Loan Specialist who can help you throughout the entire process to find the perfect fit for your business needs.
Finding business loan help can feel overwhelming but it doesn’t have to be.
By keeping good financial records and paying attention to the metrics lenders are most interested in, it is possible to get the business loan you need on terms you can afford.
Once you are ready to get started, you’ll want to shop as many lenders as possible to find the right fit.
LendGenius.com makes it easy by presenting offers from multiple lenders who want to work with you.