At some point or another, almost every business requires some form of financial assistance to see them through.
Small businesses might need a loan or credit card to get office supplies, a company vehicle, or new signage for your business, and without a lot of cash available it can hard to afford these on your own.
The most popular way to get credit for your small business is with a loan or a credit card, depending on what you plan on purchasing and when you intend on paying it back. It’s important to be smart about applying for the right credit that will suit your needs so that you don’t get caught out not being able to make repayments in the future.
The small business loan requirements are somewhat different to those of a personal loan for an individual, and if you’re smart about your application then you’ll be in with a far greater shot of being accepted. We’ll help you figure out what do you need to get a business loan or line of credit so that you can put your focus back on growing your business and increasing profits.
The Different Types Of Credit A Small Business Might Need
So, what do you need for a business loan and do you have the prerequisites that most lenders are interested in seeing? Business loan requirements can be somewhat different to personal loans and a lot more in depth, so you should be prepared to share information with the lender including tax returns and financial statements pertaining to your business income.
There are many reasons why a business might want a loan, and financial institutions and lenders can often tailor credit to suit these needs. Here are some common types of small business loans:
All of these loans will come with varying interest rates, repayment options, and terms and conditions, all designed to make it easier for you to keep up with repayments. Once you know the type of loan you’re after and which lender best suits you, you’ll be ready to take the steps you need.
The Steps To Get Small Business Credit
The biggest key to getting a small business loan is to understand the specifics of what the lender requires.
All lenders want to see different things from their potential borrowers, whether it’s a small business loan or a credit card, so take your time and do your research. Here are the steps you can follow that will guarantee you a better shot at getting the small business credit you need to grow.
Understand Your Credit Score
As a small business owner, your business won’t have its own score but rather will rely on your personal score as a representation. Credit scores range from 300 to 850 with the higher number being the better one, so if yours is lacking for any reason you should work at improving it before you attempt to apply for credit.
Once your business is established, it will eventually get its own business credit score so it’s important to foster this from the beginning. This is the first step in SBA loan requirements and by far the most important.
Learn About The Lender’s Requirements
You can generally assume that most lenders want to see the same things from their applicants to make them favorable, but some may have specific requirements. The three main things they’ll look at is how long your business has been running, your revenue, and your credit score.
Get Legal And Financial Documents In Order
Before applying for credit be sure that you have everything in order that you might need to show. This can include financial records and history, both personal and business related, legalities relating to ownership of the business, tax returns, commercial leases, and business licenses, just to name a few.
Have A Business Plan
A lender will want to see that you have a future plan in place to grow your business so that you’ll be in the best position to pay them back the money you borrowed. They’ll want to see how you plan to use their money and this will need to be extremely detailed, so leave nothing to the imagination. The more information you can give them during this stage, the better.
Some lenders will require collateral in order to move forward, or the promise of an asset that will be seized and sold to help repay your debt should the worst happen. Some people use real estate, vehicles or equipment depending on what you have to offer and how large the line of credit is.
Getting Small Business Credit For The Right Reasons
Although lenders are usually quite strict with their requirements and what they will lend for, some will simply be looking to get customers on board. Ensure that before you go ahead with a small business loan that you have done your research about the financial institution and have the best possible interest rate and terms available.
Small business loans should never be a replacement for paying off debts, but rather as a way to grow your business and take it into the next phase. Once you get into debt for your business, it will begin to build a credit score that will follow you for life, so ensure you’ve done your research and are fully capable of making the necessary repayments.