Small business loans may be the engine of our economy, but many small business owners visualize the lending process as complicated and frustrating.
In many cases growing enterprises are rejected when they apply for small business loans. It’s clear that the business of lenders is to make money and they won’t provide charity. Nevertheless, you can find ways to improve your odds of getting a loan.
Some of the things to bear in mind.
- Compare the situation between applying for a loan as a job interview. Prepare an incredible application containing you financial situation and collaterals. Dress nice, as if you don’t need the money. There are also other key factors such as cash flow and credit quality. You always need to think with the mind of the lender.
- Calculate how much money you really need. It’s more likely that you’re rejected if you ask for more money than you really need.
- Learn from your mistakes. Try to figure out why a lender has rejected you therefore when you go to the next one it won’t notice the same deficiency.
- Internet lenders charge higher interest rates but have more flexible requirements; this is a good choice for people with poor credit in a business-to-business environment who can use them as collateral.
- Your first consideration should be working with Small Business Administration-backed (SBA) lenders. People tend to believe that obtaining an SBA loan is very difficult because of their great features such as low interest rates and generous repayment terms. Perhaps some SBA lender turns you down, but keep trying with others.
- Know what you’re getting into. You have to learn the annual percentage rate (APR) of the loan. It’s a good thing that you know what the fees will be, and also any prepayment penalties. You should be an informed shopper.
Small Business Loans
As I mentioned above, particularly for people who have bad credit, online lenders may provide funding (and very fast) if other alternatives fail. Internet lenders don’t have such good reputation because of their lack of transparency and onerous terms, not mentioning their high interest rates, you may want to consider if you really need the money –and can pay it back– before going down this way.