What Every Small Business Owner Should Know About a Small Business Loan Application

One of a business owners biggest challenges can be securing enough money to keep business running smoothly. While it can be difficult to get through the small business loan application, and may feel impossible for those of us who have spent weeks trying to gather the necessary paperwork, every business is going to need some extra cash at some point. Luckily there are ways you can make the process easier, and more sources for small business applications than you might think.

Loans From a Traditional Bank

What you will need:

-An updated and highly detailed business plan

-Personal and company financial records

-Bios and resumes of you and any partners

-Collateral

-Possibly Tax documents (depending on the bank)

Tips:

Know your credit score in advance. Most bank loans depend heavily on the personal finance of the business owners or partners for the small business loan application. Because of this it is important that you know exactly what the potential lender will find before the meeting. This also makes it important to take care of your personal credit.

Start at places you bank with. If you are already a customer of a bank or financial institution, start there. Banks are more likely to lend to customers they already know and have a relationship with.

If your banking history isn’t so great, find a bank where they work with many companies about your size and set up a new account with them. Be a good customer for a while.

Demonstrate your knowledge and abilities. Make sure you have a good understanding of your industry and your business

Don’t get discouraged if you are turned down by the banks. Many banks are still trying to recover from the economic meltdown caused by their bad lending practices and are skittish about lending. In fact the LA Times recently reported that lending is at it’s lowest level in years, but don’t worry, there are still more places to go.

The SBA

After you have been turned down by bank or other lender, you may be eligible to apply for a small business loan from the SBA. The terms on these loans are usually very good, however they are difficult to qualify for and will take several months to get funding from.

What you will need:

-Application for loan

-Statement of personal history, required for each principal applying for a 7(a) loan

-Personal financial statement

-Balance sheet and profit and loss statements

-Projection of income and finances

-List of names and addresses of any subsidiaries and affiliates

-Certificate of doing business

-Signed business federal income tax returns for previous three years

-Signed personal federal income tax returns for previous three years

-Personal résumé, including business experience of each principal of the business

-Brief history of the business and its problems, including explanation of why SBA loan is needed

-Copy of business lease

-Additional documents if proceeds will be used to purchase existing business

Tips

Many of the tips for bank loan still apply, so make sure to check there as well.

-Keep an eye on legislation. More funding for SBA loans may be coming through US Senate soon.

For a Lending Company

If you have already been turned down by the banks or SBA, or if you can’t afford to wait out the months’ long small business loan application process then this may be the best option left for you. You do need to be careful and find a reliable company who will explain the small business loan application process as you go and make sure you understand the terms.

What you will need (varies from company to company)

-Financial records for company

-A minimum number of credit card sales (for an MCA)

-A few other documents

Tips:

-Research the terms of the loan.

-Find out exactly what you will owe.

-Make sure the company has a physical address

Again, the lending companies do have the advantage of being fast, and easy to qualify with, but it is important that research both the company, the small business loan application and the terms of the loan carefully.

For more information on navigating the small business loan application process visit the link.