VIDEO: Tips When Applying For A Small Business Loan
Many business owners can be intimidated by the prospect of applying for a small business loan. The Biz2Credit Loan University is designed to give business owners the information they need to submit a successful business loan application.
When applying for a small business loan, try to think like the lender would think. What you may not realize is that the lender wants to make as many loans as possible, just as business owners want to sell as much as their own product or service. As a business owner you have more influence over the process, and outcome than you may realize.
Thinking like a lender means you need to know what the lending agent needs to process your business loan request. Having your documents in order and having consistent records simply helps the lending agent process your application more efficiently. The time it takes to process your loan has a lot to do with how prepared you are as a borrower.
Not only will being prepared help increase your chances of getting a loan, it will help you get your business loan faster.
Tommy Blinder is the National Sales Manager at Biz2Credit. Tommy and his team process hundreds of small business loan requests each month. In this short video, Tommy explains the importance of consistency in your financial records.
Being organized can help with your loan request, but ultimately your business needs to be a good financial risk too.
Tommy’s key tips for being consistent are simple and may help your get your business loan and get it faster. Let’s take a look at at some of the key issues covered in this video:
- Is your company profitable?
- Tommy Blinder:
- “Finance companies want to see you are profitable.You need to show your profitability through revenue – so that means you need to have your bank statements organized demonstrating your deposit flow.”
- “as a business owner you need to make sure your tax returns are prepared to show your revenue – which you should discuss with your CPA or accountant. If you’re operating a cash business you need to be depositing into an account otherwise you will struggle here. The key thing to keep in mind is accounts must reflect actual business.”
To recap, Tommy suggests that you concentrate your preparation on your financial documents and your tax returns. Lenders will typically ask for the following documents:
- 6 months (up to a year) of bank statements
- Any outstanding loan agreements or accounts payable
- Any documentation of owned assets (may be used as collateral)
- Any accounts receivable outstanding (may show future ability to repay your loan)
- Your revenue flow (credit card processing account statements);
All of the above should also be reflected relatively closely in your annual and/or quarterly tax return statements.
Here are some “To-Do” items that may help you prepare for applying for a business loan:
- Notify your accountant or financial advisor that you’re looking for a loan and ask their advice or assistance,
- Check your credit history. Credit reports often contain errors, omissions or outdated information. If you find any of these issues, open a credit dispute with the credit reporting agencies. Most disputes are resolved within 30 days. It is not uncommon to raise your personal credit score by 50 or more points as a result of erroneous information. A higher credit score can mean a lower interest rate on your business loan, a larger loan amount or even the difference between approval and rejection.
- If you are in a cash business, you need to show your bank deposits (remember: “consistency”)
Tommy’s theme for this business loan tip is to ensure that your records and your application reflects your actual business.