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BizReport : Ecommerce : May 24, 2019

How Do I Qualify For a Small Business Loan

If you need small business loans, you should make adequate effort to earn them.

While some candidates may be interested in bank loans, some others may look more towards the alternative lenders, either way, there are some important factors you need to be sure are in place in other to qualify for either kind of loan.

We'd be taking a quick tour of the top five factors that qualify candidates for small business loans and their peculiarities.

Note that each factor may not specifically be pointed at as a document or credential, but whatever credentials are needed to fortify such a factor would equally be highlighted.

1. Credit Score
Personal credit score sees your financial history and determines how properly you have managed funds in the past, it also determines interest you are liable to. Your business credit score, on the other hand, tells the lender how your businesses have been able to generate revenue and pay back the lender. Having either or both of these scores stay somewhere above 600 units, broadens your chances of securing a loan with any institution of your choice.

So to qualify for a small business loan, make efforts to have a high credit score, however, there are ways to handle the situation with a low credit score.

2. Business Plan
The second factor here is to design a flawless business plan, one that gives your lender a reason to rethink his decision when other factors may not meet the required standards.

A strong business plan is a way to buy the lender's faith in the survivability of your business. This may not be a documented need for a lender to approve your loan application, but it always is a big push. Your estimated income, profit, expenditures and general cash-flow would be an easy marker so a lending bank may decide your eligibility. In some cases, if you don't qualify for your loan of interest, you could be offered a functional alternative, all just for having a perfect business plan.

3. Define Your Intention/ Reason for Borrowing
This is a major non-document factor. Having a clean cut reason for seeking fund with a plan of how to achieve it, could be a major determinant of your approval or rejection. So to shift the favor to your side, follow these steps;

a) Asses your credit score; as the basis of loans eligibility, a low credit score usually prevents you from qualifying for a bank loan. This ultimately means you'd seek alternative lenders, for example Kabbage is a great lender to start with.
b) Learn your lender's interest; after discerning how far your credit score can get you, know what your lender (Bank or alternative) is looking for. It's not always the same but pretty much borders around the same principles. For borrowers with low credit score, you might need to redeem yourself with a long term operating period or resounding collateral.

4. Collateral
Collateral is a property or item of value that you use to stand in for a loan. It has recently faded into subjugation with the establishment of different loan requirements. Many of such loans services, however, require a parallel means of securing the return of funds given out as loans, a high credit score and high-interest rates are examples of such.

Although there are alternatives to it, collateral is a significant part of small business loans, therefore being able to provide one, improves your eligibility.

5. Be Organized
After all is said and done, eligibility still boils down to your person. Having a great credit score and business plan only goes so far if you fail to physically assure your lender that their funds would be returned.

This is one of the reasons why you researched your lending institution in the first place. Create a list of the requested documents and credentials, have them placed in know positions, one over the other, especially if your assessment session is going to be physical.
All such cooperate discipline, don't get written as a requirement anywhere, but they are carefully monitored in some cases.

Be reminded; by no means is this the limit of what's needed to qualify for small business loans, a combination of all these factors, however, gives you eight out of ten chances of qualifying for whatever loans you are interested in.

On a final note, know what amount of funds you are after and be sure to include it in your business plan.

Thanks for reading,

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