For entrepreneurs, a small business loan is a successful enabler that can help them expand their business and boost its growth. Several factors may warrant the need of capital in a business. It could be to promote marketing efforts, enhance market research, enable expansion into new territories, and so much more. Most importantly, business loans can also provide necessary financing during difficult periods.
Today, a large number of traditional as well as emergent fintech lenders offer business loans without much hassle, making it a lot easier to avail financing. Lenders are loosening their purse-strings while making the process quick and simple. Despite the modern-day lending convenience, you may find it difficult to navigate through the idea of getting an online business loan. Here are the curated steps that you must follow to get a small business loan and obtain better insight into the process.
Step 1
Determine if you Qualify
You must be realistic about determining your qualification for a small business loan. Evaluate your credit score as banks typically offer business loans only when the score is above a certain threshold, i.e. near 680-700. In the case of a lower score, the scrutiny as well as the interest rate is likely to be higher. Additionally, you must assess your annual revenue, your ability to make timely repayments, and the business collateral.
Step 2
Conduct Research on Lenders
Lender search is of utmost importance as it will determine your experience throughout the loan process. There is a huge selection of lenders that you can choose from on Finserv MARKETS. Compare the options, requirements, and reviews before opting for the best pick. Ensure that the lender accommodates your needs and business profile.
Step 3
Keep Your Financial Statements Clear
Lenders tend to review a business’ financial statements and account records before approving a small business loan offering. Carefully evaluate your documents like the balance sheets, cash flow statements, sale invoices, and more. Ensure that they are correctly filled wherever required. Run your financial statements by your accountant to steer clear of any issues that may arise.
Step 4
Gather the Essential Documents
It is imperative to be prepared with your documents before applying for a small business loan. Organize all the documents that a lender may ask you to present. Some of the documents include business background, legal structure, details of executive officers, tax ID, insurance policies, financial statements, business plan, tax returns, and more. In the case of a secure loan, you have to furnish details of the collateral as well.
Step 5
Specify Loan Requirements and Use of Proceeds
You will have to specify the total amount that you wish to borrow through the small business loan. Carefully choose this amount to avoid payment defaults. Additionally, the lender would also inquire about how you will use the proceeds. So, stay prepared to provide details about how you plan to use the funds.
Step 6
Figure in the Best Guarantee to Provide
The primary concern of any lender is to ensure that the borrower successfully repays the loan at the end of the tenure. Security or guarantee in the form of a business or personal asset is widely favoured by lenders. Determine the asset that you can present to the lender depending upon your business structure. It could be company equipment, business property, or even personal assets.
Step 7
Stay Prepared for a Business Review
The lender may perform an inspection to understand your business and its shareholders. Prepare well by keeping your company website updated and reviewing your online presence. A clean track record will help establish the credibility of your business.
Step 8
Analyse the Terms of the Proposed Loan
The proposed, small business loan must align with your business structure and you must ensure that it is the right offering. So, put in a considerable amount of time and effort to analyse the proposed terms. Review the principal amount, payable interest, processing fees, penalty in case of default, and any kind of future expectations. Also, read the terms and agreement carefully.
Step 9
Submit Your Application
Once you complete the above steps, you can go ahead and submit your loan application. The lender will help you with all the documents and paperwork that you must furnish and submit either in person or online.
Step 10
Accept the Small Business Loan Offer
The lender will evaluate the business profile and review the qualifications. If you meet all the requisites, the loan will be approved and the funds transferred to the listed account in as few as 24 hours.
In a bid to attract a larger customer base, financial institutions offer competitively lucrative offerings including special business loans for women. Understanding what the lender will assess and preparing well is a good way to get the best benefits from a small business loan.