Getting a loan may position your company for growth, but how do you convince lenders that your company is worthy of a business loan? Follow these tips to improve the likelihood that your loan will be approved.
1. Have a business plan
Your business plan should include an overview of your business, projected financial statements, as well as a plan for repayment of borrowed funds. Your plan should also include résumés for the owners of the company and an assessment of competitor businesses. Show how your business plans to distinguish itself from the competition.
2. Have financial documents in order
Look the part and be clear about your financial state of your business. The application process will be more seamless if you take the time to keep your financial, accounting and tax records up-to-date and accurate.
3. Maintain good credit
Try to pay all of your business bills on time. it's important to have the best credit possible. Avoid foreclosures, bankruptcies, charge-offs and late payments. Good credit is an essential part of the process and will only help with the process.
4. Research which type of loan you need
Understanding the type of loan that works best for you is important. You might just need a line of credit and not a full loan such as one from the SBA. Know your options.
5. Show sufficient cash flow
Provide a current profit and loss statement if you can or tax returns from last two years. If your business is seasonal, be prepared to speak to how you manage in down times.
Lastly, but more importantly we want to hear your company's story. You need to make a case for why your company needs the money. Simply highlighting past successes does not necessarily explain why your company is looking for a loan. Is there a new partnership you're looking to pursue? Has there been growth in an area of your industry that the loan will help with? Be specific about what makes now the right time to seek financing.