Small businesses are cornerstones of every country’s economy. If you’re considering to start a small business, you should take into account the financial risks and challenges you may face as an entrepreneur in today’s world of business.
There are several important steps to take when applying for a small business loan. Here they are:
- Know Exactly Why You Need a Small Business Loan
Determine why your small business needs a loan. You will have to repay the loan so it should serve the purpose of growing and expanding your business. Lenders will take your business more seriously if you can justify your need for a business funding.
- Find the Right Loan Provider for Your Business
Before applying for a small business loan, know whether the lender specializes in your industry or not. Find out the minimum qualifications of all the lenders you are considering to approach beforehand. Remember that the bigger loan requirements you have, the more reputable lender you should apply to.
Online lenders are becoming more and more popular among merchants looking for small business loans. Consider turning to an established payment processor like First American Merchant (FAM) to get the best business funding opportunities for your company, including FAM’s popular Merchant Cash Advance. FirstAmericanMerchant.com offers hassle-free application and fast approval.
- Take into Account How Fast You Need a Loan
If you need funding for your business as soon as possible, you should find the right lender that offers fast application and approval to file an application with. Otherwise, you will lose time and put your business at risk.
- Prepare All the Necessary Documents
As a rule, traditional banks and most lenders ask business owners to provide certain financial and legal documents when applying for a loan. These papers are non-negotiable and include, but are not limited to, personal tax returns, business income tax returns, balance sheet, business license, income statement, a resume, article of incorporation, driver’s license, personal and business bank statements.
- Build a Strong Business Plan
Knowing why you need business funding for your company is not enough when applying for it. Lenders will need to know your plans concerning how you’re going to spend the money. Also, you should prove you have enough cash flow to cover your business operation costs and to repay the loan. For this, you should provide your lender with a well-though and strong business plan that includes your current and expected financials.
- Provide Collateral
Most traditional banks and government bodies, including SBA (Small Business Administration) will require collateral. They may require inventory, real estate, equipment, or other assets that will be seized and sold in case your business fails. There are online lenders that require a personal guarantee instead of collateral by asking your credit score and personal assets. However, you can also apply for unsecured business loans to avoid providing collateral or risking your personal and business assets.