The United States Small Business Administration office reports that small business loans are growing in the country, with lenders giving out over $615 billion dollars a year. It’s a good sign for the country, but also for today’s business owner who may be feeling they are in over their head when it comes to running their business. You don’t need to be consummately wealthy to apply for business loans. If you were, you wouldn’t need one. Find out how to get a piece of that pie and get the funding you need fast, right here.
It’s a common misconception that you need to be wealthy to get a business loan. You don’t.
In some cases, you don’t even need a good credit rating. You just need to show your lender that you are a good business owner and worthy of the chance.
The largest growth in lending to businesses today is occurring in loans under $100,000, which grew by 7 % between 2015 and 2016 according to the United States Business Administration office. You don’t need to struggle to stay afloat and keep your American dream alive.
You just need to know how to get the funding you need, fast.
Why Apply for Business Loans?
The simple answer to this question is, because it’s easier than it ever has been before. No matter what stage of your business ownership you are in, you can apply for a business loan today and have a good shot at getting it as well.
At the same time, it’s a financial risk to try and back yourself. Even if you have the liquid to put into your business, applying for a business loan is a more sound financial strategy.
You are in essence investing in yourself when you apply for business loans. And although applying for a loan is a bit of a risk in itself, it is not as great a risk as dumping your life savings into a business plan.
It is a myth that you need to be wealthy to apply for a business loan, and banks understand this. They know business owners wouldn’t seek loans if they already had the cash.
It is also a myth that the lender atmosphere is not loaning to risks due to the 2008 real estate bubble. They are, but you can’t go in blindly.
Lenders today know that small businesses and startups are a risk. But the more prepared you are to assure them, the easier it will be to get that loan.
Prepare Yourself – The Basics
You need to have all of your ducks lined up before you start that business loan application. In a nutshell, answer all of the same questions you would have if someone asked you for the money.
Answer those questions before you make the application. Banks like lending money. It’s where they make a lot of their money, on your interest payments.
But if you are a risk, they know they won’t be making any interest on you. So prepare yourself so that you can sell your business to them in a way they can’t say no. Show them you will be able to pay them back consistently.
It’s better to have an established income flow from an existing business, but it’s not a requirement. If your banks can see that your business already makes money, that is one question answered for them.
But you are also going to need financial security. That doesn’t mean wealth, it means having assets or a co-signor that will cover the loan if you default.
You don’t want to dump all of your assets into your business. But if you have something to secure the loan with that shows the bank you are willing to take the risk on yourself as well.
Lenders are in the business of making money, just like you. They want to profit from you as much as you want to profit from your own clients.
When you think like that, you can go into your business loan application more prepared.
You’ll need to tell them how much you want, what it will be used for, and how long it will take for you to pay them back.
Get Credit Worthy
You also should be credit worthy before you apply for a loan. In your personal credit line that is mandatory, but it’s not always the case for business.
You don’t need a huge credit score, although that helps. If you have a track record of paying bills on time that is a big plus.
But you still can get a business loan without a high score as many lenders today use a multitude of factors to determine your credit-worthiness. Know what those factors are before you apply.
The bigger the bank, the bigger the weight on your credit score.
Having collateral or a guarantor will help as well if your credit isn’t in the best shape right now. Learn the credit scores that business owners need to know about before you apply.
Have a Contingency Plan
It’s natural to go to big lenders first, but don’t always consider that as your only plan. Have a backup plan.
The United States Small Business Administration office says that the largest banks in the United States devote only approximately 3 % of their own assets towards business loans.
That will decrease your likelihood of getting one, even if you have perfect credit. Consider smaller institutions who are lending out at approximately 13 % of their total assets, as that will increase your chances of getting that loan.
Don’t give up if you get a no. But also do this research before you apply as well. Credit unions and community lenders may be a first go-to if you are worried about approval.
Have a Backup Plan for Your Backup Plan
If you’ve done the prep work, have an income to pay for a loan, a guarantor or security for the loan, and faith in your business, you might be ready for a business loan. But a good business owner has a backup plan for their backup plan.
The United States Small Business Admin Office says that lending has improved since the pre-2008 real estate bubble burst, and business growth is on the rise.
When you apply for business loans, make sure you are as close to being a sure thing as you can. Get funding fast and easy when you use your own customers to pay down your loan.