As a small business owner, you will inevitably find yourself in a situation where you need to invest money to reach your goals and ambitions for growth. Ideally, of course, you’ll want to work within your limits, assessing the resources you already have at hand. But if your current cash flow isn’t enough to support the investment you need, business loans may be an option.
Once you’ve determined how much additional funding you need, when you’ll need it, and what you’ll be spending it on, the critical question is: do you qualify for a small business loan? What qualifications must you meet for a successful application? Here are a few questions to ask yourself to help determine the answer.
Are all your ducks in a row?
Because the amounts involved in a business loan are generally much higher than a personal loan, the requirements are stricter as well. Since a small business loan can be as much as, or even more than, a mortgage, you can expect a similar level of scrutiny when applying.
You’ll need to put your best foot forward to qualify for a business loan, meeting every requirement to inspire confidence from a financial institution. While there are other options for business funding, like a merchant cash advance, getting a bank’s approval for a small business loan means jumping through all their hoops. Of course, it helps to have an existing relationship with the bank you’re applying to – it’s a good idea to have your
Do you have a business plan?
When you apply for a loan, lenders will want to know that you have a plan for the funds they lend to your business. Demonstrating that you have a business plan and you’re not just flying by the seat of your pants can be an important part of qualifying for a business loan.
What are your assets?
Depending on the lender or the type of loan you’re applying for, you may be expected to have some kind of collateral to put forward as part of your business loan application. Or you may simply need to be prepared to disclose your capital business assets to give a lender an idea of the value of your business. A general accounting of your capital business assets may be enough as a general lien on your business, rather than specific collateral.
Do you know your credit score?
Both your personal and business credit transactions are on record, and that credit history is one of the things a lender will want to know when you go to the bank. Ensuring that your credit scores are in good shape before you apply will raise your chances of being approved for a small business loan.
Although a credit score of over 650 is considered good, 700 or higher is a much more favorable position to be in when you’re applying for a business loan. Of course, that also means that lower scores can severely hurt your chances of a successful application.
Talk to the experts
With the answers to these four questions, you’re ready to talk to an expert. Qualifying for a business loan is demanding, and you want to be thorough. You'll need to meet a lot of requirements, and you’ll need to provide a lot of evidence that your business is healthy and ready to grow. Talking to an experienced financial expert or advisor can help you maximize the odds that your application will lead to your small business successfully qualifying for a loan.
Wondering what options are available to you? See how much you might qualify for with our quick calculator.