Are you thinking about making a move from being a diligent employee for somebody else’s vision to becoming your own boss? According to surveys, this is the most popular reason for starting a business with financial freedom being a close second. Starting your own business is a dream but it can be a costly one. Securing funding in the form of a small business loan can help your dream become a reality.
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Chose a Lender
When it comes to how to get a business loan, the first step is to choose the right lender. Banks, credit unions and other agencies exist that are capable of giving out these loans. A salient consideration for choosing a lender is figuring out who will offer you the lowest interest rate. There are other questions to consider, as well, including:
- How strong are your finances?
- What type of funding do you need?
- When do you need the loan?
Asking and answering these questions will give you insights into your needs, as well as the lender’s. For instance, even though banks and SBA loans typically offer the most competitive interest rates, they come with strict qualifications. You’ll likely need at least two years in business, strong annual revenue and good credit. In fact, many lenders require a credit score of at least 650 from applicants.
The type of funding is important to pin down, as well. There are loads of business loans out there but not every lender offers them all. If you need to invest in heavy equipment, you’ll want to find a lender who offers dedicated equipment financing. For ongoing worker capital, you might consider a business line of credit that you can draw from regularly.
Finally, if you need that loan fast, you might consider prioritizing online lenders because they have online processes that let them process applications quickly.
Gather Your Application Materials
Each lender may require particular documentation for its small business loan application. The most common information that they’ll require from you covers a spectrum of details. This will range from the most basic, such as the business’s name, address and tax identification to more developed information about your annual revenue, such as profit and loss statements, tax returns and bank account information for both the business and the business owners.
Regarding your personal information and depending on the lender, you may need to furnish details about the business owners. Typically, this includes names, social security numbers and addresses for anyone who owns more than a certain percentage of the company.
Some lenders may require collateral before they will put up the loan. This might be real estate or equipment. You should be prepared to provide information about the type of collateral you’re offering and how much it’s worth. An independent auditor can help you to generate an accurate audit of your assets.
Review Your Application
When reviewing your application, it might behoove you to let somebody else assess it, especially if it includes information that could be subject to interpretation, such as a business plan. Incidentally, the business plan might be the single most important element that you bring to the lender’s proverbial table. A good business plan should be able to answer most questions that lenders are going to have.
Follow the Lender’s Instructions for Application
Some lenders are exclusively online while others allow you to apply in person or over the telephone. Regardless of how you apply, be sure to find out the lender’s typical turnaround time so that you’ll know when to expect news, at which point, you can move forward with your plans, one way or another.
There are over 33 million small businesses in America, accounting for 99 percent of all businesses in America. New ones are popping up every day. Even though the rates of attrition for small businesses can be staggeringly high, if you believe in yourself and generate a thoughtful and impactful business plan, there’s no reason why you cannot succeed. To do so, you’ll undoubtedly need a business loan. By simply following the steps required by the lender and having your ducks in a row, you can put yourself in a position to get the loan and hang up your shingle.