Steps To Take When Getting a Business Loan From a Bank
Traditionally, banks are associated with catering to larger and established business ventures.
However, banks are gradually warming up to the SMEs and now offering them funding options.
Nonetheless, getting a bank to approve your business loan requires preparation as well as research.
And in this article, we shall show you the steps you need to take to get your business loan approved by the bank.
Calculate How Much Big of a Loan You Need
The first step of getting a business loan from the bank is calculating how much you need.
Perform a thorough research of the loan amount that you need using a loan calculator, to avoid under-quoting or over-estimating.
While at it, you would also want to state how you want to spend your finances. Often, banks want to assess how the funds will be spent.
If you're looking to purchase and equipment, for instance, it would be suitable if you applied for an equipment loan. And if you are looking to pay debtors, a short term loan would be ideal.
Choose Items for Collateral
Most of the banks usually require borrowers to put up collateral.
Therefore, you need to identify something that will guarantee your loan.
The larger the loan, the more collateral is needed.
Putting up personal assets, or investment further goes to show how committed a business owner is at borrowing the loan.
Write a Business Plan
To increase the chances of securing a loan from the bank, you need to have a solid business plan.
A business plan brings out what your business entails; shows who you are, what your business is all about, and the future plans of your business.
Ideally, a business plan should state the business’s goals, mission, and how it will run to achieve the mentioned objectives.
Clean your Credit Score
All financial institutions, whether banks or online lenders, verify whether you’re eligible their loans and whether you can repay in full and on time.
One way to do that is through examining your credit scores.
Therefore, when applying for a business loan, ensure that you check on your credit scores and reports.
Ideally, a credit score of 700 and above should improve your chances of securing a loan.
If your score is lower than 600, the odds might be against you, but might as well consider alternative revenue-based loans.
While at it, check for the errors that might appear on your credit report.
Assessing your Lending Options
After verifying your credit report, you now need to research on the available lending options.
If you don’t know how to choose your small business loan company we recommend that you start by asking other business owners within your industry where they attained financing.
In most cases, you’ll realize that banks that have a history of funding businesses comparable to that of yours are the best ones to approach for funding.
Additional, if you get many referrals to a particular lender, it shows they are reliable and might offer you a loan.
However, whatever options you choose to go with, ensure they meet the demands of your business.
Keep the Financial Records in Order
Before approaching the chosen bank, ensure that you've all the proper financial statements.
Having proper financial records in place will make it easier to sail through the screening process. This is because many banks will always want to check on your financial records such as balance sheets, and income statement to determine whether you're capable of repaying the loan.
Therefore, before approaching your bank, ensure that you’re keen on keeping and compiling the financial records in order.
- Your quoted amount should be justified by your business plan’ financial statements
- Contact a professional when working on your business plan
- Be patient. Banks are slow at processing loans, especially the long-term business loans