Small Business Loans: Ready, Set, Apply!

Having enough funding is a huge concern for small business owners. After friends and family have been tapped and bootstrapping doesn’t cover the shortfall, many entrepreneurs turn to small business loans. Preparation is key to successfully obtaining a loan from a lender. Here are four ways to make sure you are prepared before you apply.
1. Determine Your Cash Needs
Banks will want to know exactly how much money you need to operate. You can prepare for that question by making a cash-flow projection. This determines your cash flow needs from the time you purchase goods or services from suppliers to the time you collect payment for your business’ sales.
2. Plan an Effective Use of the Money
Not only do banks want to know how much funding you need, but they also want to know how you are going to use it. Your plan for the borrowed dollars should help to grow the business, not just pump money into routine expenses. Each dollar you borrow should help you grow your business profits so that the lenders’ investment is worthwhile.
3. Prove You Can Repay the Funds
Be prepared to show lenders how you will repay their small business loan. This means that your monthly repayments should be manageable within your current cash flow projections. You should be able to show the bank that you can still make your payments even if you have a bad month here or there.
4. Be Sure You Meet the Minimum Requirements
Applying for a small business loan and not getting it can actually hurt your chances of being approved the next time. Every loan denial on your record makes you less appealing to lenders. Before you apply, talk with the lender to make sure you fit the specific requirements of the bank’s loan program. Is your credit score high enough? Do you have enough assets to use as collateral? Once you are fairly certain you will be approved, submit your application.