Whether you’ve never applied for a business loan before or have gone through the process many times, you may be wondering how to increase your chances of successfully getting the loan you need to start your business.
Fortunately, there’s no big secret about how to get a loan to start a business – especially if you plan to go through the Small Business Association (SBA). To create a winning SBA loan application, you need a few tips and some careful preparation. If you can submit a loan application with just five winning attributes, you can secure the funding you need and be on your way to successful business ownership.
1.) Be Upfront About Your Finances
A winning SBA loan application is one that includes a fair representation of your business and personal finances. As part of the lending process, your lender will want to have an accurate picture of your fiscal health. They will consider your credit score and history, debt burden, and much more. They may also want to know about any assets you own. Trying to falsify or hide the facts of your finances is very likely to sink your chances of getting approved, so be upfront about everything in your documents.
2.) Make a Great Business Plan
A professional, detailed business plan is essential to a winning SBA loan application. This is because it is one of the main documents a lender uses to determine how risky it will be to offer you a loan. Not only should your business plan include a detailed budget and projected income and expenses, it should also demonstrate an understanding of the market, how your business is (or will be) positioned in the market, and how you plan to become and stay competitive.
3.) Document Everything
Part of how to get a loan to start a business is having the correct documentation. Be sure to take the time you need to gather the documents your lender will most likely ask for. These include prior year income tax returns, financial statements for your business, bank statements, a copy of your business license, and any contracts, including your franchisor agreement, related to your business. It’s also a good idea to provide documentation for any negative items appearing on your credit report, especially if there are extenuating circumstances that might help your lender put these items in context.
Perhaps one of the most important things you can do to help get your SBA loan application approved is to choose the right lender. The right lender, in this case, would be one with experience working with small business owners and/or business owners associated with your franchisor or in your particular industry. Just as owning a business depends on good relationships, you need to be able to work productively with your lender in order to secure the financing you need. Make prompt, positive communication with your lender a priority, and provide everything they ask for as quickly as you can. Even these small things can help improve your chances of approval.
5.) Make a Case for Eligibility
Finally, a winning SBA loan application will help your lender see how well you meet their eligibility requirements for a loan. To make your case as strong as possible, you first need to have a thorough understanding of what those requirements are. Be sure to pay close attention to the eligibility requirements listed on the type of loan you plan to apply for or as specified by your lender. Then, craft your application documents to demonstrate how to meet those requirements. If necessary, enlist the help of business associates, fellow business owners, or your franchisor to help you put your application in the best possible light. In fact, investing in a franchise could be the best way to get the financing you need, since your franchisor is likely to have good relationships with lenders who know they can trust a quality business model.
Disclaimer: This communication is offered for informational purposes only and not for the purpose of providing legal advice. Readers of this document should contact their attorney to obtain advice with respect to any particular legal matter.