Securing a business loan is among the most common obstacles that many small businesses face, primarily because of the stringent rules by banks. However, getting outside funding is usually necessary for launching or growing your small business or for covering daily expenses such as inventory and payroll. Here are four expert tips you could use to boost your chances of obtaining a business loan.
1. Level with the Lender and Tell Your Business Story
A loan officer from a renowned business bank in MN specializing in small business loans strongly recommend that you make a compelling case for your company when speaking with lenders. Tell them why you need the loan for and why they should approve your application. Talk to them about your business’ growth and what your plans are to grow your business. Don’t just get stuck highlighting your previous successes, showcase your plans as well.
2. Get All Your Financials in Order
In general, you must show how profitable your small business has been for the last three years or so to be eligible for a loan. Because lenders would inspect your credit history before deciding on whether to approve your loan or not, you should pay close attention to your business’ credit rating and anything else in your report that lenders might see as a red flag.
3. Opt for Local Lenders
National lenders are less likely to notice you if you haven’t been in business that long, are not that profitable yet, and lack ample collateral. Consider going to your local business bank and ask about SBA loans. Because the government could guarantee as much as 80% of your loan under SBA rules, you might have better luck securing yourself a loan.
4. Consider Alternative Funding for Your Short-Term Expenses
Look into factoring and asset-based lending. Asset-based lending is similar to the standard loan process; your lender would assess your fixed assets, inventory values, and accounts receivable to gauge your business’ creditworthiness to determine how many lines of credit you could qualify for. With factoring, you could sell your accounts receivable to obtain a loan with a value as much as 80% of your accounts receivable.
If you’re looking to get a temporary infusion of funds or credit to grow your small business, securing a small business loan might not be that easy. With this in mind, let these aforementioned tips guide you to get the financing your small business needs.