Taking out a business loan offers many benefits. For instance, business owners regularly rely on loans to fund the expansion of their facility, add a new facility, procure equipment, and obtain the working capital necessary to hire labor and purchase inventory. Before applying for a business loan, it is essential to do your research and understand the basic qualification requirements. Here are the top things you can do to improve your chances of qualifying for a business loan.
Work On Improving Your Credit Score
If you’re a small business, building your business credit score can work in your favor. Most lenders consider your personal credit score because it’s a good indicator of whether or not you’re adept at managing your finances. A good credit score also indicates that you have a habit of making loan payments on time, and this reduces the lender’s risk. The quickest way to improve your credit score is to correct any errors on your credit report. Paying down your debt is also a great way to boost your credit score over time. Having a robust business credit can help you qualify for an SBA loan.
Approach an SBA-Preferred Lender
An SBA-preferred lender provides SBA loans that are backed by the government. The best type of SBA loan for you depends on what you intend to do with the money. For instance, an SBA 504 loan is more suitable if you’re looking to expand your business, while the SBA 7(a) loan is a better option if you need working capital for various purposes, such as purchasing inventory and small ticket equipment.
Understand the Lender’s Requirements
Each business loan comes with minimum qualifications and requirements that you must fulfill. Any lender, including a CDC and the SBA, looks to the business operation as the primary source of repayment. Some lenders require you to provide collateral, referred to as a secondary source of repayment. Generally, the minimum requirement for small business loans includes good credit and a good cash flow track record, though there are usually additional requirements depending on the type of loan. It’s important to ensure that you provide the lender with all the required information and submit all the required legal and financial documents. Failure to do so might delay the process or result in a rejected application.
Doing these things will help increase your chances of qualifying for a business loan. Get in touch with us if you would like to know more about qualifying for a business loan.