Getting approved for a business loan is a large hurdle that many small businesses have to face and this is mainly due to the rigorous lending guidelines that big banks stick to. However, obtaining finance from an alternative lender is often an essential and attractive means for small businesses to start, begin to grow and expand or simply for a small business to cover their daily management expenses.
So, what should you include in your small business loan application?
When gathering information to incorporate into your loan application, you should aim to answer the following questions:
- What is the purpose of the small business loan? Lenders will want to know what the loan will be used for, and that you have the management skills and cash flow to pay it back.
- How much you intend to borrow and over what term? This will help both you and the lender to determine what options are available to you, along with how the loan will match up to your cash flow.
- How soon will you need the money? If you will require the money in a singular lump sum or in numerous payments?
- How long will it take you to pay back the loan? This will assist in determining whether your small business has the necessary cash flow to actually pay the loan back, but it will also determine the terms and conditions of the loan repayments.
When composing your small business loan application, you will have to work to boost your odds by standing out from the crowd and displaying that your small business has greater value and potential than other small businesses. A good loan application must convince the lender that the money that you will receive will support your small business in either becoming more profitable, or that this money is essential to its continued operation, along with the information to demonstrate that you will have enough revenue and cash flow to pay the lender back.
5 Things To Do Before You Apply For a Small Business Loan
Despite the fact that applying and securing approval for small business loans can be difficult and stressful at times, the more prepared you are, the better your chances are of getting approved.
Here are our best tips to improve your chances of securing your small business loan.
1. Determine why you need a small business loan:
Many lenders will ask you why your small business needs a loan and your answer will most likely fall into one of these categories.
- To begin and establish your business.
- To manage your daily expenses.
- To grow and expand your business.
- As a safety cushion.
2. Decide the type of loan that is right for your small business:
Your reason for applying for a loan will dictate the type of loan that your small business will get.
For small businesses that are only just starting up, it is generally nearly impossible to obtain a loan within a company’s first year. Many lenders will require cash flow, along with supporting documents, in order to support the repayment of the loan, which is why so many startups are immediately disqualified from receiving financing.
However, for small businesses with a minimum of a year of cash flow history and revenue evidence, they will have a wider range of options.
3. Decide on the best small business lender:
Small businesses can acquire loans from several lenders including big banks and alternative online lenders.
When looking for the right small business loan lender, approach the selection process just as you would if you were shopping for a car. Seek out lenders that offer the type of loan you are looking for and once you have determined the lenders that are right for your small business, you should compare two or three options that offer similar annual percentage rates, along with their terms.
4. Determine if you qualify for a small business loan:
- One of the most substantial factors that will determine whether you will qualify for a small business loan is your credit score rating and history.
- Along with your credit score, most lenders will consider other factors such as the amount of time your business has been in operation.
Evading payments of loans, having an unresolved debt and the lack of consistent income are all factors that will work against you when applying for a small business loan.
- If you are currently in the midst of any of these issues, then it is in your best interest to address and resolve as many of these as possible before you begin to apply and take out a loan as it can significantly improve your chances of being approved.
- Most online and banking lenders will require a minimum annual revenue, and depending on the lender, this amount can range anywhere from $50,000 to $150,000. It is advised that you know yours, along with the minimum a lender requires, before you apply for your small business loan.
- Examine your business’s financials carefully and thoroughly, especially your cash flow, to evaluate the amount you can sensibly afford to apply towards your loan repayments each month. In order for you to easily and comfortably repay your loan, your small business’s income should be at least 1.25 times the businesses total expenses, ensuring that you include the new loan repayment amount to this total.
5. Gather necessary documents:
Once you have compared your lending options, it is now time to apply for specific loans that fit your small businesses financing needs and that your small business qualifies for.
You are able to apply for multiple small business loans from various lenders within a short time frame, typically within 2 weeks, without inflicting a negative outcome on your credit score and rating.
Depending on your chosen lender, you will be required to present a combination of relevant documents along with your application. These documents may include, but are not limited to:
- Both the businesses and your personal tax returns.
- Business and personal bank statements.
- The business’s financial statements.
- Relevant business legal documents such as the commercial lease or franchise agreement.
Whether you are applying for a small business loan, big or small, these tips will make the job easier and more successful.
LoanOne knows how Australian small businesses work and provides small business owners with easy, fast funding solutions that will help your small business grow.
The business loans from LoanOne are different to other, traditional business loans as our loans are flexible, paper-free and unnecessary extensive supporting documents are not required. We aim to help businesses who need loans fast!
LoanOne offers businesses:
- A fast and easy online application and a timely loan approval.
- The most secure technology that will ensure that any information that you submit online remains strictly confidential.
- A friendly customer service experience via phone or email.
- No hidden fees! We have competitive fees that are consistent with financial industry standards and are completely transparent.
With LoanOne, get fast, simple and safe loans! Fill in their 5-minute online application today!