Small Business Loans

For many small businesses, obtaining a business loan can mean the difference between success or failure. So where do you find the right small business loan and how do you get approved?

Finding different types of small business loans and their associated funding sources is the easy part. Getting approved requires attention to detail. Each small business loan provider will have slightly different criteria for what they require to approve your business loan. Before you apply make sure you ask each lender about their approval criteria and then make sure your business (and you) meet the criteria before you authorize the lender to do their checks.

For example, business loan approvals may require that your business has good business credit scores, so ask. And then check your business credit scores before you apply. A business loan provider might require that everyone who owns 20 percent or more in the business have above 680 personal credit scores. So ask and the check your scores before they do.

Ask each lender what all the approval points are and then check yours before you let the business loan lender check. The reason for that is, once 3 or more business lenders have run personal and business credit checks, then any lenders you go to after that will most likely not approve your business loan simply because three other lenders have checked before them.

As a small business owner, your most difficult task is finding the money to operate your business. Taking the necessary steps to prepare for a small business loan can minimize the difficulty. Learn what you need to know to clinch the loan deal. Banks and other lending institutions cite risk factors as their main reason for turning down small business loan requests from startup businesses. Yet, you can still get a loan for your business by proper preparation.

The main requirements of attaining a small business loan are your personal credit history, business plan, experience, education, and feasibility of the business you are starting or expanding. The most important task to obtain a small business loan is preparing a business plan. The business plan needs to show the lender that providing you with a small business loan is a low-risk proposition. Your business plan must answer the questions a lending institution would ask. These questions usually are:

How much money do you need?

If you are starting a business, this should be included at least in the start-up capital estimate. Accuracy is important, so request enough money to invest wisely.

What are you going to do with the money?

You will have to provide, in detail, the designated use of every dollar requested. A small business loan is often needed for: operations (new employees, marketing, etc.), assets (equipment, real estate, etc.), or to pay off business debts.

When will you repay the small business loan?

Explain in detail how this small business loan will serve as a stepping-stone for your business. You will need to convince the lender (with your financial statements and cash flow projections) that you are able to repay the loan through the expected long-term profitability of your business.

What will you do if you don't get the loan?

Let lenders know that rejection will not discourage you from starting or growing your business. You want to portray a confident and determined personality and you will try lender after lender until you receive the money you need to get your business moving.

Let lenders know you are in control and know what's best for you and your business. Understand that lending institutions need to make loans. But if you don't get one, don't get discouraged. Ask the lender why you didn't get the small business loan. Learn from the answer, move on, and try other lenders.