What You Need to Know About Small Business Loans

It’s not unusual for small business owners to feel intimidated in their efforts when applying for business loans. Although funding can be difficult and overwhelming to obtain for any company, small business owners are often left out in the cold when it comes to getting approved for a loan.

New business owners, in particular, may find it difficult to get funding for their fledgling startups. If you have experienced the frustration of obtaining a loan for your new business, here are a few ways you can help remedy this problem.


First Impressions

The days of walking into a bank or lenders office are long gone. You no longer have to enter with your best suit, well-groomed, and dressed as the professional that you are. However first impressions are important in other aspects now. If you are sending an email be professional in the words you choose to write and the business plan or executive summary you choose to prepare. If speaking on the phone make sure you are professional and show the lender you know your business and are the subject matter expert.

When submitting an application it is of the utmost importance to be completely honest and answer all the fields on the application. You need to build trust, if you did not disclose or did not correctly fill out the application it can be automatically denied and they can choose to never accept a loan application from you or your business.

How is your Credit?

By checking into your credit history, lenders can see whether you pay your bills on time or you’re behind on making your payments. Make sure you pay down your loans below 30% of the available credit lines and clean up any negative or delinquent inquires that may be found on your credit report. There are many good companies that can repair your credit. Ask us and we will gladly refer you to one.

Lending institutions also want to see whether you have any significant outstanding debts to pay off. If you do have any large debts, you may want to settle these before applying for a business loan. You’re more likely to get approved for a loan with a lower debt-to-income ratio. Having a lower debt to income ratio will open up your options and provide you better better terms.  Lenders want to see that you’re financially capable of repaying a loan. They also want to confirm that you’re financially responsible.


Request Only the Funds You Need

This has to be the number #1 issue we see. Small business owners are rejected for a loan due to asking above and beyond what they really need or can afford. By being prudent in the amount of funds you request, you can avoid problems getting approved. It is important that your loan advisor know your financials to avoid an undue denial. Some lenders will not deny you but counter with a loan amount and terms you do apply mitigating their risk.


Consider Your Financial Position

When applying for a small business loan, look at your request from a lender’s perspective. What circumstances would encourage a lender to approve your request for a loan? Is your financial situation stable? Is your loan request realistic?

What funds do you currently have in your business account? How is your cash flow?

What is the collateral for your loan? Collateral provides lenders with the security they need to cover the risk of approving commercial loans to new businesses. Not all business loans are against collateral but it does place you in a better position to receive a business loan.  Some lenders will go off your last 6 months of receivables asking for your last 6 months of bank statements.

Avoid Repeated Loan Mistakes

Don’t repeat mistakes when applying for business loans. If a lender rejects you, find out why and fix the problem. This will give you a head start on a getting loan approval from the next lender or going back to the first lender after you have resolved the situation.

Sometimes simple mistakes or omissions in your loan application can put cause a denial. Make sure you review and re-review every email and attachment you are submitting. Even have your business partner, spouse, or another trusted friend review before submitting. By learning from your mistakes, you improve your chances of succeeding the next time around. Always continue to GROW!



Apply for SBA Loans

Your first thought for small business financing might be to apply for an SBA loan. SBA loans backed by the Small Business Administration. Eventhough yes with a SBA loans, your company benefits from low-interest rates and excellent terms for repayment but it may not be the right solution. SBA loans do take longer than a conventional loan and much more paperwork. You must consider your position and the amount of time you have to wait.

If you are rejected for an SBA loan, don’t panic there are other alternatives.

Consider Local Banks

Keep in mind that small banks are often more agreeable to help small business owners obtain a loan. By providing loans to small businesses in their area, small banks can help stimulate business growth in their community. Large banks and financial institutions are more likely to back major corporations.


Consider Alternative Lenders

If you have poor business credit, consider applying for a loan with an alternative lender. These lenders charge a much higher interest rate than conventional lenders, but have fewer restrictions on loan approval, making it easier for small businesses to get the capital you need.

Merchant Cash Advanceloans are another good alternative. These lenders will typically charge a higher interest rate but they due require less paperwork instead going off your last 3 – 6 months of receivables.

If you go this route, however, make sure you’re fully aware of the terms of your loan, including annual percentage rate, late fees, and prepayment penalties and are capable of meeting these terms for repayment.

If business financing is what you need, we can help. We offer a wide range of financing options including structured business loans, lines of credit, commercial loans, bridge loans, security backed lending, mergers & acquisitions, renewable energy, and WTE financing.

We offer flexible solutions for small businesses. There are no denials. We will find a solution for your business whether you have been in business for years or just starting. We will provide you a free consultation and develop a customized loan solution or funding plan, regardless of your credit .