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How To Improve Your Chances Of Getting Small Business Administration Loans
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Small business administration loans are definitely competitive, but there are ways you can improve your odds of getting approved. The best thing you can do is prepare for the process as early as possible, as this can make all the difference in getting the funding you need. Banks will often consider a wide range of factors to decide whether they should grant you a loan, and this may include your business profitability and personal credit. Preparation will allow you to put your best foot forward.
Before you even think of applying, it may help to consider which small business administration loans will be right for your business. The SBA guarantees loans up to $5 million in their 7(a) loan program, with an average loan of about $337,000. Most lenders don't want to provide loans under $50,000, so if you're interested in these small business loans, you may want to check into their Small Loan Advantage Program. This program offers a maximum loan of $350,000 with a streamlined application. You may also want to look into microlenders with loan programs that do not include this SBA guarantee, as SBA loans really only account for a small portion of small business lending and you may have other options.
To apply for a Small Business Administration-guaranteed loan, you will need quite a bit of paperwork, and the SBA has a convenient checklist of the documents you will need. Be prepared to provide detailed information. This means you shouldn't skimp on details, so be prepared to show how you will use the loan and how much you need. Lenders want to see that you're prepared and have attention to detail. If you need new equipment, offer quotes on the exact costs, the capital necessary to facilitate the purchase and how the new equipment will help you grow your business.
You will also need to supply your personal history and financial statement, along with business statements. This includes a profit-and-loss statement and a full year's worth of projected financials. Lenders want to see your complete financial background, including your future growth plans and personal financial information. While business loans for bad credit are possible, you should work as hard as possible to get your credit in shape before applying.
Your personal finances and credit are very important for getting approved, as is your business credit. Begin early to pay down your balances, increase your available credit and address any red marks on your credit file. You should also try to improve your balance sheet, whether it's through boosting sales or lowering overhead to make your business more profitable. Keep in mind the loan officer will look at historical data, not just the last month's history, so put off your loan application as long as possible to get your business in good shape.
While applying for small business loans backed by the Small Business Administration is a lot of work, it will pay off with lower interest rates and greater flexibility. It will also give you a chance to avoid relying on credit card financing, which can get very expensive in the long run.
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