Several small business owners see lending as a complicated and frustrating process. Growing enterprises too often find themselves out of luck when they try to get small business loans. Theoretically, it should be tricky to get financing – lenders aim to make money, not provide charity service. Still, there are several ways to make your chances of obtaining a business loan better.
- Put yourself in a lender’s shoes. A lender may be willing to help customers like you, but why should that company lend you? When you apply for a business loan, treat the process as if you apply for a job. You need to present a stellar application, instead of an excellent resume. This means knowing your financial state and deciding which item to use for loan collateral, which may include your residence. If one offers up their personal asset as collateral, it shows he or she has faith in their business. Credit quality and cash flow are other important factors. Besides, dress professionally; when you turn up at a lender’s building like you are not desperate for the money, then you likelier to obtain it.
- Self-assess your finances. Find out how much you really require. Too often, businesses seek more amounts than what they really require; the more money you seek, the likelier you will be declined by a lender.
- Learn from your own mistakes. If a lender rejects your application, find out the reason behind it. When you visit the next lender, you should address that deficiency.
- In a B2B environment, businesses with poor credit having accounts receivable can use these as collateral. Non-bank lenders, like those online, may charge higher rates of interest, but these usually have relatively more relaxed standards than traditional lenders.
- Always consider working with SBA-approved lenders. Several businesses incorrectly assume that they are not eligible for an SBA loan. SBA loans usually have generous repayment terms and low rates of interest. Keep in mind that just because an SBA-backed lender rejects you, not all such companies will do the same to you.
- Know what you are getting into. This means learning the APR (annual percentage rate) of the loan you are applying for. Know what its fees will be, and whether there are any prepayment penalties. Try to be an informed customer in these matters.
- Small lenders are likelier to be helpful than larger banks which prefer working with bigger customers.