Tips on applying for a small business loan
When applying for a loan as a small business owner, it’s so easy to be overwhelmed by the process. We’ve put together a list of our top tips for applying to help you get approved and expand your business.
Go over your business credit profile. Take a moment to review your credit profile and ensure that it’s up to date. This will help address any concerns the lending institution may have. You want to be able to put your best foot forward, regardless of your current credit situation.
Develop your company identity. Lenders will be more likely to consider your application if you are an established legal business, such as an LLC. Apply for a federal tax ID number (EIN) and open a separate business checking account with at least five deposits each month. Additionally, you can further legitimize your business by establishing a separate company phone number, and publishing a company website.
Have several vendors that report to credit bureaus. Working with established and trustworthy vendors will also help to establish your business as a legitimate entity worth lending to. Research your potential vendors – public filings can give you a reasonable idea of their reliability and credit standing.
Make sure your personal credit score is above 500 points. Without good credit, it can be very difficult to get a loan approved, or to achieve a reasonable interest rate. Having good personal credit shows the lender that you can be trusted to pay back the loan, increasing your chances of getting the loan in the first place. The higher your personal score, the more likely you are to be approved, and the better interest rate you will receive.
A good reason to get business financing. First and foremost, the lending institution will want to know why they should give you money for your business. Be open and honest with them, and approach the process with specific examples of how you would use the money to grow your business if approved.
A business identity reference sheet. Put together this one-pager to state the basics of your business identity, including how long you have been in business, how many employees you have, your business Tax ID number, and your average gross annual revenue, as well as any additional information about your business that would be helpful for the lender to know.
Recent business bank statements. Be sure to download at least three months’ worth of statements from your bank’s website so you can easily add them to your application, or send them to your loan advisor.
Research public filings of your business. Check to see if you have a UCC filing on your business, and make sure your Secretary of State filing is up to date. It’s also a good idea to be aware of any liens or judgements on your business, as this could affect your application process and/or terms of approval.
This may sound like a lot, but don’t worry – you’ve got this! Applying for a small business loan can be a great way to grow and expand your business more efficiently, as long as you maintain your credit and keep up with payments. Download our checklist to make sure you’ve hit everything you need to before submitting your application. Happy borrowing!