Getting accepted for a small business loan can seem like an uphill struggle. With mountains of paperwork to complete and supporting documentation to provide, it’s often something that business owners put off until the last possible moment. But the frustration doesn’t stop there – just 26% of applications are approved by the big banks, so how can you stack the odds in your favor?
In this article, we’ll walk you through 5 practical tips that can improve your chances of getting a small business loan. Whether you need to fund expansion, purchase new equipment, or replenish stock, these strategies can help.
#1 – Whip Your Credit History into Shape
Your personal credit history can have a big influence over the success of your application. You might think that business and personal finances are completely separate, but banks will look at your credit history to assess potential risk. It can either provide evidence that you’re a reliable investment that always pays on time, or it might be a red flag that kills your chances right from the start.
According to Experian, your credit score is influenced by things like payment history, credit utilization rate, number of accounts, history of credit use, and current mix. If you’re concerned that your credit score isn’t as healthy as you’d like, then start taking steps to improve it. Paying on time is the single most influential factor, so set up automated payments to ensure you never miss one. If you’re able to, then pay down existing borrowing so that your utilization rate is also improved. These steps can help to boost your overall score and maximize your chances of acceptance.
#2 – Prepare Documentation Ahead of Time
Many lenders will require additional documentation to support your application. This might be financial accounts from the last 3 years, business certificates, or proof of ownership related to collateral. For some business owners, this is the most tedious aspect of the application process, but it needs to be faced head-on.
Speak to your lender ahead of time and find out what documents they require before you make the application. This will avoid any unexpected surprises during the process, along with delays while you try to source it. If you don’t have copies to hand, then it may take time to contact the relevant parties and arrange for proof to be provided. Getting a head start will minimize the headaches and ensure everything progresses smoothly.
#3 – Create a Detailed Loan Plan
Lenders will be reassured if you can demonstrate exactly how you intend to utilize the money. The best way to do this is to create a detailed loan plan that outlines what the cash will be used for. Breakdown the costs that will be incurred and predicted return, along with timeframes for repayment. This will help to show that your plans are feasible and reduce the perceived risk of lending to you.
#4 – Get Support from Professionals
If you’re unsure how to create a loan plan or have questions about other aspects of borrowing, then get support from professionals. This might mean hiring an accountant on a per hour basis to help you get your application in order. Depending on the structure of your business, it may involve getting input from your financial manager or board of directors. The important thing is that you have knowledgeable people review it so that any gaps or weaknesses can be fixed in advance.
#5 – Don’t Procrastinate
If you’re looking for funding from traditional institutions then the application process can take weeks or even months. It’s therefore important that you start early and don’t procrastinate, otherwise, you may find that you don’t receive the funds in time. This can put you in a position where your back is against the wall and you’re forced to accept terms that aren’t competitive. However, if you work with alternative lenders then the process is usually much faster, with applications approved in as little as 24 hours.
How We Can Help
Capital Collab offers small business loans that support organizations across the USA. Whether it’s to pay for emergency repairs to your commercial property or investing in expansion we offer loans without the need for collateral. Best of all, you’ll benefit from competitive repayment terms and low interest rates, so you have more money to reinvest in your business.
Upon submitting your application, it’s reviewed by a dedicated Capital Advisor. We generate the best rates and terms at lightning speed through our funding matrix and robust lender network. Yep… it’s that simple. Learn more about our small business loans here.
Checking for pre-approval will not affect your credit score.
