Nav
  • Types of business loans
  • How to Find and Qualify for a small business loan

How to get a business loan

So you have come to a point in your business where you’ve realized that you need additional funding to grow. And this is an exciting and great position to be in although the idea of getting a business loan can be very overwhelming especially with the number of choices and options out there in the market today.

With a great plan and falling some simple steps you can really make business lines work for your business and really give you the opportunity to grow. Growth is not just something that happens overnight this is something that you need to plan for and you need to organize over a long period of time.

We will go through a few steps to assist you In getting the right strategy together to get the right loan and to get the information you need to get that loan.

Why do you need the loan?

Small businesses have many reasons for a loan, to assist in cash flow m purchase new equipment and also to expand on their current business. The reason for a loan needs to be one of 2 things either the loan will assist the business Increase their ROI in the future Or it will decrease it expenses In the future.

So the first thing you need to understand Is where your loan will fit into this category and how it will impact your business.

The next thing is to understand the stages involved in your spending If you’re looking for loan to make multiple purchases Then what impact does it purchase have.

Knowing this information will give you the ability and also did the funder the ability to work out how the loan will fit and how it will be structured. In many cases Alone will be structured into multiple payments allowing for risk to be distributed overtime.

How much can you afford?

Taking on alone is about understanding what you need to pay and what you can afford to pay back and the benefits of the loan itself. There is multiple methods of calculating and working this out. First of all It is important to understand that any funding you’re going to get Is going to be based on some of these calculation. Which means any funding company Will provide you only funds they believe that you can afford to pay back.

So in general you need to work out what can you afford to pay back per week For a loan with your current cash flow This will give you a baseline of what you can afford to borrow.

What you need to factor in is how much cash you require to keep for liquidity and also how much cash you need to keep for unknown expenses.

Getting your documentation ready

In general the loan process is very similar even with different types of loans because they need to understand your background the risk involved and other factors to calculate your. So this following instructions are the general documentation that you going to require to collect and delivered to any funding company.

Personal Credit Score

Almost every funder will look at your Credit score As even if I do not use this credit score in any calculations it’s a reflection of your responsibility with money and your reflection of how trustworthy you are as a individual to pay back funds.

Before applying for a loan it is worth at least checking with the credit Bureau what your current personal credit score is and it’s also worth checking to see that it is correct. In many situations there are mistakes on your credit report which may reflect badly on you when getting funds. Small errors or miscalculations can lead to very large impact on your credit score. So take the time to make sure everything is correct and that you’re getting the best possible score that reflects who you are.

Daily and Monthly Bank Balance

Lenders will evaluate your bank statement. This might be done in many different ways but here are some of the factors that they’ll be looking for. They will be looking for your daily balances or weekly balance is they want to see how many transactions there are and they level of liquid iti there is in your business. Also they will want to see your monthly bank balance is they also want to see how much funds you retain over a period of time and how you grow your funds.

Also another key factor that will be looking for is your negative days. This will be an indication to see how good you are at managing your cash flow And how you manage your accounts.

If you manage your accounts Across multiple bank accounts or multiple bank accounts it is important that you share this information with a funder as this information is highly valuable when calculating Your ability to actually pay back a loan.

Time in Business

Time in business can be calculated in a few ways. Some funders will look at when you first register your business. Others will look at when you first opened a business bank account. The time in business is a key metric in terms of reliability for your business. If you have started your business earlier that when you opened your bank account you may want to have records which will show evidence of this.

Normally the minimum period of time of being in business is 3 months although this does not have a very strong track record and it will be difficult to apply. Business for 6 months Minimum is ideal but even still this may limit the type of lines that you can actually apply for.

Account Statements

Account statements are not required by lenders, although if you go through a bank, they are probably going to be required. You will most likely need to get Balance, Profit and Loss Statements as well as Tax Returns.

This is something you would get your accountant to prepare for you, knowing that you will be using these to get additional funding.

Application

The application process will vary between funder to funder. But in general they will follow the following process. First you’ll need to fill out a small application form and include some information such as 3 months worth of bank statements. This application allows for a quick assessment Of your business and who you are. From here your application will be processed at evaluated by an under writer. The under writer will classify Where your application should go.

Almost all funders will work with other funders. The reason being is that each funder has its own models and specialty. So when you get a loan in the background is not necessarily just one company funding you it may be multiple companies which are funding you.

Once the under writing has gone through this process they will match you with the right funder and the right underwriting process for your business.

At this point the under writer will go through a series of calculations To workout how much you can afford to pay back When can you afford to pay it back and how much risk is it going to be to lend you this money. All these factors will come back To you in terms of Either fees interest rate payback. And the amount that you can borrow.

Dop you what to know what you qualify for?

You are welcome to go through our application process and fill out your applicaition

Our team will work out what they can offer you, and they can talk to you about the options

Apply Now

Additional Reading

All about your Business Credit Score