Managing finances isn’t easy. Whether you’re trying to cope with the stress of everyday life or you’re an entrepreneurial business owner, there are times when it can feel as though you’ve never got any money.
When you face a personal financial emergency, you might look at taking out a payday loan via a direct lender in order to get yourself through. But when you run a business, you may have to look at different options.
Things like a business loan are going to be the most common finance option for small business owners, but you might be unsure how easy they are to obtain. If so, keep reading to find out…
Strict Criteria
There are lots of different factors that will determine how easy a small business loan is to get, and one of the most important is meeting the criteria set out by the lender. Each lender will have a different set that they want potential borrowers to meet.
If you aren’t able to, then they won’t approve your application. To make it easier on your business, make sure you read through and fully understand the criteria before you apply. This way, you’ll avoid disappointment and hopefully be able to access a loan quicker.
Criteria can be anything from how long you’ve been trading to how much profits you’ve made in the past year. If you’re a new business, there are still options out there for you. There are loans that are specifically designed for small businesses who may not yet have built up a lot of profit, so don’t be disheartened if you see this on a lender’s criteria.
Good Credit Rating
A good credit rating can make all the difference when it comes to how easy it is to precure a business loan. Business credit is built up over time and is done so by doing things like paying your bills on time, using a business credit card and paying it off regularly, and even simple things like having a business bank account.
Whenever you apply for a small business loan, the lender will take your credit score into account. A good credit score demonstrates to them that you’re capable of repaying them. A bad score indicates that you might be too risky to lend to.
As you can see, it’s vital that you work on your business credit score if you want to be able to apply and receive a business loan. If you don’t yet have a business credit rating, then the lender may look into your personal one. This means you need to focus on boosting your own as well as the business’ one too.
A Business Plan Is Essential
Another thing that lenders will look at is your business plan. This is so they can see if your business is viable and likely to last long enough to pay them back.
Make sure that you have a solid business plan before applying for any type of loan, as you don’t want to be stumped when it comes to answering questions about it. Having the plan to rely on will allow you to answer the questions accurately, helping the lender to give you a quote that’s perfectly tailored to your business.
Guessing or making it up as you go will only put you into a bad position in the long run, and you may find your applications are a lot more readily rejected. Preparing your business plan in advance will help your applications immensely and make the whole process run much more smoothly.
Avoid Making Lots Of Applications
One thing you want to avoid when looking into small business loans is making too many applications. While you might think that it won’t do much harm, it’s actually damaging your credit rating.
Small business loans are relatively easy to obtain when you meet the criteria, but if you don’t, then it might be a lot harder. When you apply for a loan, the lender will run a hard search on your credit history.
Too many of these will actually decrease your score, so you can see why applying for lots of small business loans is bad for you. If you want to easily obtain a business loan, only apply for the one that you believe you’re likely to get as you meet the criteria. Don’t fall into the trap of constantly applying for loans, as you’ll end up constantly being rejected.
Asking Questions Can Be Your Friend
One top tip when applying for a small business loan, is to ask loads of questions. Loans can be complicated things and the criteria can sometimes be confusing. If you don’t understand something, then you may be setting yourself up for rejection without even realising it.
This is because knowing the answer to your one simple question might mean you don’t actually want to apply for it, and you’ll avoid damaging your credit score. Knowing the answers to the questions you want to ask, will make receiving a business loan that much easier as you’re much more likely to be approved.
Final Notes
Applying for a small business loan can be a lengthy process and you may find that it’s hard to see it all clearly. However, if you take your time and make sure you understand everything that’s required, you’ll find that you’re able to complete your applications with ease.
It’s also vital that you figure out which loan is right for you, as this will put you in much better stead when it comes to being approved. A business loan could completely change the trajectory of your success, and it can really make a difference to your daily operations. So, don’t feel like the finances you want are out of reach.
In fact, small business loans are pretty easy to obtain when you know how. Make sure you meet the criteria and you’re halfway there. Before you know it, you’ll be well on your way to seeing the growth you want, and it won’t be an arduous journey to get there.
