How to Get Approved for a Small Business Loan
Part of the small business start-up process involves securing the funding you need to get your business up and running. Small business owners can acquire funds from a number of different sources, but the most common method of funding is through a small business loan from a bank. The ease of getting approved for a loan will depend on your level of risk as determined by the lender. Doing your research in advance can help make the process of small business loan approval more seamless.
Determine Your Desired Funding Source
Small business owners can find funding through traditional and non-traditional means. Each different type of lender has pros and cons, so consider all of the options before you proceed. Many individuals choose to start with a traditional bank loan or a loan through a credit union, while others look toward modern online sources that are specifically created to fund start-up small businesses.
Determine Your Eligibility
Your likelihood to succeed in securing small business funding depends on how much of a risk the lender is willing to take. Before applying for a loan, review the qualification criteria set forth by each particular lender to determine your eligibility. In contrast to personal loans, small business loans specifically want to see demonstrated cash flow and ability to repay the loan before granting approval. If the loan is backed by the Small Business Association, part of your eligibility involves proof of good character by documenting your personal history. Having an issue in your history does not necessarily disqualify you, but be prepared with documentation that you have corrected any past blemishes.
Gather Your Documentation
One of the most effective ways to gain approval for a loan is to have all of your documentation in order when the process begins. If you are choosing a traditional business loan or any loan that involves underwriting, the processes can move more quickly and be more likely to be approved if you have properly organized and clear documentation. If you choose a faster route, such as a microloan or a short-term loan that uses your business as collateral, find out what documentation you will need in advance so you don’t waste your time gathering unneeded information.
As a small business owner, securing funding is a big part of your start-up or expansion success. By learning about the different types of small business loan options and the approval requirements of each, you can have a great chance of loan approval success.