When it comes to setting up a small business, if you do not have all the funds to do this, it can seem quite a daunting task. It is important to remember that you are not alone, and many people who are setting up a small business look into borrowing a small business loan.
Small business loans are useful, especially to get your business up and running. They help to give you a sense of security and peace of mind. However, they are not always the easiest to attain, and many people struggle knowing where to begin.
The most important thing to remember is to carry out the correct research and do all you can to ensure that your application is correct. This will give you the best chance of getting approved.In this article, we will be talking you through how you can be accepted for a small business loan.
How can I get a small business loan?
Applying for, and receiving a small business loan is not a quick process, it can take a good amount of time to complete. However, there are a handful of things you can do to ensure the process is as easy and as quick as possible.
Have A Good Credit Score
Before applying for a small business loan, you will want to ensure that you have a good credit score. If your credit score is not great, this will greatly affect your chances of being accepted for a small business loan.
This is because lenders will want to ensure you are capable of paying the money back on time. Small businesses are often seen as risky because they are new and are not large businesses. Essentially this means that the company may not be as stable as more established businesses.
Given this, you will want to ensure that your business is worthy of receiving a loan, and that you are responsible and capable of paying the money you have borrowed back.
When it comes to the criteria that needs to be met, your personal credit score is one of the most important things that is taken into consideration.
The better and more positive your credit score is, the more likely you are to be accepted. If your credit score is not great, do not be disheartened. This just means you will need to take some time out before applying for a small business loan to improve your credit score as much as possible.
Once your credit score has improved, then you will be in a better position to be accepted.
Planning Your Business Expenditure
In addition to having a good credit score, you will want to efficiently plan out your business before applying for a small business loan. This covers a number of different things, but the most important thing you will need to consider is how much money you require.
Having a concrete plan of how much money you need to borrow looks positively to investors. It allows them to see that you have a good idea of how much money you need.
In addition to this, you should be able to prove to the lenders how you are planning to spend the loan, as they will be able to see how it is being spent.
While filling out the application correctly is important, the planning process is critical. You will want to cover all bases when it comes to your application and how you are planning to use the loan. It is useful to plan out some points about why you need the loan.
Having The Correct Documentation
When you are in a position where you are ready to apply for the small business loan, you will want to ensure that you have all the correct documentation needed to apply.
The types of documents you will need will vary depending on the lender. Given this, you will want to check the requirements fully before applying.
Typically, lenders will require documentation such as - credit scores, bank statements, statements of purpose, business plan, and personal tax returns. Though they may require further documentation too.
Choosing The Type of Loan You Want
The next step you will want to take is to choose the type of small business loan you want to apply for. There are many options available, and these options can vary depending on the lender.
Given this, you do not want to rush into a decision. Some different loans include - bank loans, SBA loans, short-term loans, and long-term loans. As they all vary in length, you will want to apply for one that is best suited for you and the payback options.
In addition to the length of the loan, they will all vary in price and interest. You will want to ensure that you are in a position where you can afford the monthly payments to pay the small business loan off.
While it is not the case for everyone, the majority of small businesses owners apply for an SBA loan, which has a Small Business Administration guarantee. These tend to be the best option for small businesses, and they are looked favorably on by lenders and banks, given the guarantee.
In addition to this, SBA loans are useful to look into because they offer a wide variety of options when it comes to how much money you are able to borrow. The interest that you are expected to pay is capped.
This means that it is set at a certain rate and will not increase as the years progress. This is something that can often happen with other types of loans.
As a small business owner, the capped interest is something that is particularly appealing as you will know that the amount you need to repay is a set amount and will not increase over the years.
However, the only downside with SBA loans is the waiting time after the application has been sent in. In comparison to other types of loans, the waiting times are typically longer.
If you are looking for a significantly quicker loan, you can opt for an SBA Express loan. These typically take far less time to complete.
Applying for The Loan
Once you have planned sufficiently and have the correct documentation, to get a small business loan you will want to choose the option that is best for you and apply. The application process is not always easy, and can be quite time-consuming.
However, once your application has been sent off, you will be in a far better position to be accepted for a small business loan. Even though it is a long process, it is something that you will want to take some time to consider and not rush into.
How long does it take to get a small business loan?
After you have applied for your small business loan, it is important to remember that it is a long process, and you will not find out if you have been accepted instantly.
Typically, it can take up to 3 months to find out if you have been accepted. However, if you have applied for an SBA Express loan, these can be completed within a month.
Some will take longer than this though, as it is all down to the lender and application process. This is because there are a lot of documents that need to be read and sorted through in order to accept the application.
In addition to this, the lender will take time to look at the application thoroughly to ensure that they are happy to lend the money requested. Once the process has been completed, they will inform you on whether you have been accepted for the loan.
We hope you have found this article useful. While small business loans are not always easy to be accepted for, with the correct planning and applications, it is entirely possible.
You need to ensure you allow yourself the best chance of being accepted, and you will also need to be willing to wait a few months before receiving the loan too.
Taking the time out to plan and choose the correct type of loan is one of the most important things you can do, in addition to ensuring that you have a positive credit score, and a clear plan of how you are going to spend the small business loan.