Getting a small business loan to get your startup off the ground or expand your existing company can be difficult, as lenders will look at a few different criteria to determine if you’re qualified for a loan.
Despite these challenges, though, you can take the following the steps to improve your odds of receiving a small business bank loan from one of the many big banks or from a smaller bank like Columbia Bank New Jersey. Keep reading to learn more so you can stress less and get the money you need.
First, know what not to do
In addition to knowing what you need to do to improve your chances of receiving a small business loan from a bank, you also need to know what you shouldn’t do so you can avoid making mistakes that could cost you the loan.
If your history shows the bank that you have a lot of debt and that you don’t have enough money coming in to pay off that debt, it will reflect very poorly upon you and your ability to pay back a small business loan on time.
Also, if you can’t show the bank specific plans that you have for the future of your company, such as through a quantitative, organized, and clearly detailed business plan, they’ll be reluctant to give you money.
Start preparing in advance
Now that you know a few of the things that could prevent you from getting a small business loan, you probably already have a better idea of what you need to do in order to get one. One of the first steps that you should take, however, is preparing early for your interview with the lender.
Remember that lenders will look at two important factors when they’re determining whether or not you’re worthy of a small business loan: your profitability as a business and your personal credit history.
Therefore, it’s a great idea to pay off your credit card debt, create a business resume, and have all of your financial data ready to share with the lender. The better overall picture of your company that a lender can get through your personal financial information, growth plan, and financial history, the higher the odds that you’ll be approved.
Look into the many lender options out there
Spend the time doing the research necessary to learn about a few different financial institutions and what they can potentially provide you with. This will increase the odds of receiving a loan from a lender that really believes in you.
A good strategy is to apply to a minimum of three different lenders. As mentioned earlier, you can apply to big banks, but you can also apply to local banks. Understanding what options are available to you will give you a clearer picture of what you need to do to qualify for the options that are right for you.
Try to stick with financial institutions that have already lent money to other companies within your industry or that have worked with companies that are in the same stage of growth as yours, whether you’re expanding or you’re a startup.
Improve your credit score
You may not be able to change the financial mistakes that you made in the past, but you can certainly make changes today in order to improve your personal credit score and credit history before you apply for a small business loan.
Your odds of being approved for the loan will increase if you’re able to pay off your personal debt and achieve a higher credit score, as it will give the lender more faith in your ability to pay the loan back.
Exhibit good personal character
A lot of lenders will also look at your ethical and moral character prior to approving you for a loan. They want to know that you are a viable borrower and that you are likely to pay back your loan on time.
Your character serves as a clear representation of what it will be like if they decide to work with you. Therefore, whenever you deal with a bank, always put your best foot forward and exhibit your best behavior.
With the tips above, you can properly strategize to get your small business loan application approved. Remember that you should prepare in advance and do your best to become as financially stable as possible prior to applying. In this way, the lender will feel confident in giving you the funding that you need to make your business a success.