4 Tips for Getting a Business Loan
Banks Want to Make Small-Business Loans
1. Get your financial house (and documentation) in order. - Typically, a business needs to have been profitable for the past three years in order to qualify for a bank or SBA loan.
Since most lenders will look closely at your credit history prior to making a decision, keep an eye on your credit score and anything in your credit report that might be a red flag.
Remember, most banks will require that you personally guarantee the loan, but if you have sufficient collateral within your business to cover the loan principal, they shouldn't require a lien on your home.
2. Tell your company's story. - "In my prior experience as the co-founder of a lending company, one of the most basic errors made by loan applicants was not telling me why their company needs the money. And they wouldn't reveal why we should approve the loan even though their company doesn't meet our minimum standards," says Walter.
Is your industry experiencing growth? Are you scheduled to partner with a major retailer? What's your story?
"Don't just say you want a loan, turn in your documentation, and expect the loan officer to rubber-stamp your request," adds Walter. "Fine-tune your business pitch to include your future prospects--not just highlight past successes."
3. Go local. - A national bank is less likely to hear you out if your business hasn't been profitable for the last three years. It is also likely that your company will be passed over if you are lacking sufficient collateral to secure a loan.
"Visit a community bank and also inquire about SBA loan programs," suggests Ross. "Since up to 80 percent of a business loan can be guaranteed by the government under the SBA program, some banks may be more lenient. The downside to this route, of course, is the lengthy paperwork and delay in securing financing due to bureaucracy."
4. Look at alternative financing for short-term needs. - Alternative financing is on the rise as historically profitable or growth-stage companies face shortfalls in cash flow.
"Asset-based lending and factoring are good bridge financing avenues for many small businesses," says Ross.
With factoring, a company sells its accounts receivable to receive a short-term loan of up to 80 percent of its value. Asset-based lending is more comparable to the traditional loan process, where a lender will evaluate accounts receivable, inventory values, and fixed assets to determine creditworthiness, and issue a line of credit. If you don't qualify for traditional bank financing, look at these alternatives, but expect interest rates on these types of loans to be at least double what you'd pay for a traditional loan.
Read the full article at: marla
Patty Block, President and Founder of The Block Group, established her company to advocate for women-owned businesses, helping them position their companies for strategic growth. Charting the course for impactful, sustainable, profitable businesses, the beacon is control: of your strategic direction, your money, your time, your staffing, and your ability to bring in business. The Block Group brings together the people, resources and ideas that build results.
Business continuation for women.
Business consulting for women entrepreneurs in Houston, Advice for women entrepreneurs, Business Coach in Houston, Growth strategies for small business, Business continuation for women, Growth for women-owned businesses, Houston business coaching, Financial strategies for small business, Small business consulting in Houston, Business management consultant, Business, Consulting, Women, Entrepreneurs, Houston, Coach, Growth, Strategies, Coaching, Continuation, Owned, Owner, Financial, Consulting, Management,
