Finance

Preparing for A Business Loan Application? Here’s What You Need to Do!

Applying for a business loan is a great way to pump capital into your small business, but applications for a loan can get competitive. The key to securing a loan with good terms is to prep ahead. Here’s how you can do it.

Do Your Research

Educating yourself on business loans – what they entail, what the interest rates are, and other finer details – is a great way to establish trust with your lender and score funding for your small business.

Build Your Credit

Having good credit lets your lenders know that your business is credible. Your credit score allows lenders access to information about how quickly you pay off bills, how many credit lines you’ve opened and how you utilize debt. If you’re still in the initial phase of your business, you may not have the kind of credit you need to qualify for a bank loan. If this is the case, you may be eligible for a business credit card. Credit card companies usually look at your personal credit to see if you qualify.

Get Organized

Organize documents and paperwork like revenue statements, expenses, debts, and assets. Cloud-based bookkeeping software can help you manage paperwork, send and track invoices, generate financial reports, and calculate taxes.

Get Accurate Estimates of How Much You’ll Need

If you secure a loan with more funding than you need, you could accrue a lot of unnecessary interest. On the flip side, requesting less money increases the chances of leaving a project unfinished and returning to the bank for a second loan.

Get an Accurate Estimate of What You Can Afford

Study your revenue and expenses to determine whether you can realistically afford the monthly payment.

Provide Proof of Cash Flow

Use cash flow statements to create projections of your business’s financial future. This makes the lender confident about the income that will be generated from the funds they release.