Having a steady, healthy and reliable cash flow is the lifeblood of a small business. As a business owner, you may reach a time when you need a loan to meet your daily cash flow needs, handle an emergency, or support business expansion. Don’t panic. There are ways you can increase your chances of getting approved.
Prior to meeting with a lender, evaluate the following three factors that can impact whether or not you qualify for the loan you need.
1. Status of your credit and risk profile
When shopping for a business loan, it’s important to first evaluate your current credit and risk profile. Your credit profile provides lenders with a history of your business’ financial obligations and allows them to evaluate your risk potential. Review these items and, if necessary, consider investing time to clean up your profile before applying for a loan.
2. Preparation of detailed business documents
To avoid delays, and frustration, during the application process, it’s important to prepare thorough documentation that provides a lender with everything they need to know about your business. Required documentation may vary depending on the type of loan you are applying for.
If you don’t have one of the needed documents, it’s important to be proactive to obtain them to help keep the review and approval process on track.
3. A plan for why and how the loan proceeds will be used and repaid
Make sure you have a clear business plan that details how you will use the financing to grow profits. Be specific about the loan amount and terms you need and build that into your business projections. Your plan should prove that you will have enough cash flow to cover ongoing expense, plus the loan payments. Without having a detailed strategy that allocates the allotted loan funds, lenders may question the motives and risks involved in providing your business with a loan.