Whenever the economy appears to be entering a downturn, lenders look at small loan applications with an even higher degree of scrutiny than they normally do. In order to go into the application process with good odds of approval, it is important that you understand what criteria lenders consider when they’re evaluating applications and what you can do to make a favorable impression. Here are some key things that you should know about getting a loan for your growing small business.
One of the single most important components of a formidable loan application is a strong credit score. Make sure you know how you are doing before you have a prospective lender running a credit check on you when you are pursuing SBA loans.. Periodically reviewing your credit can alert you to errors or potential areas of concern to financial institutions, which will give you an opportunity to take remedial action before negative remarks on closed or active tradelines hurt your creditworthiness.
Practice Good Oversight
Banks that lend to businesses want lenders that are reliable and organized. Having detailed and accurate financial statements shows them that you are managing your company’s finances well. It also provides reassurance that your representation of your financial picture is wholly correct and that you are not just dealing in round numbers or approximating your expenses. Monthly records, audited statements, and detailed reports let lenders know that you know exactly what you have to spend and earn in order to stay out of the red.
Do Your Homework
In applications for SBA loans, it may be helpful to include research about current developments in your industry to show lenders your potential for growth. When you have information from a market study, your revenue projections seem less speculative and more substantive.
You should also be able to provide a clear account of how you plan to use proceeds, and you want to address your intended use of funds with precision. For this reason, you should find out about the exact cost of various expenses. You will know exactly how much you need to request, and discussing your planned use of proceeds down to the dollar is likely to inspire confidence in lenders.
Keep in mind that SBA loans are not going to be available as quickly as other lending formats are. If you need fast capital, pick another way to get it. Getting an SBA loan takes time and patience.