A business loan can help you grow your business in many ways. You may need funds to buy more inventory, remodel your building, or upgrade your equipment. Getting a small business loan can be tricky, however. The amount of money you can receive is largely based on how successful your business is because banks want to know that they are reasonably investing in your ability to pay them back. Here are ways you can increase your chances of getting a small business loan.
Reduce your overhead
In order to get approved for a small business loan, you need to document all your finances. You should have documentation for your overhead, or the fixed spending you have whether your company makes money or not. Fixed spending includes:
The less overhead you have, the more likely you may be able to get a small business loan. Reduce your overhead by laying off employees you don't need, changing insurance companies for a better premium, or paying off company vehicles or equipment. The less fixed costs you have for your business, the less financial strain you will appear to be in to lenders.
Explain why you need money
On average, you need to be in business successfully making a profit for 3 years before you will be approved for a small business loan. If you are a new business, your chances of getting a loan are smaller. You will have to explain why you need the money and how it will benefit your business, and therefore, your lender. For example, explain to your lender that expanding your office space will allow you to feature a new service, which should bring in a certain expected revenue. If you can't explain the financial gain in borrowing money for your small business, lenders may be apprehensive in lending you funds.
Gather collateral
Your lender may want you to gather collateral, or an asset of value, to put against your loan. This can be company vehicles you have paid for, equipment that is owned outright, or even your building yourself if you are not renting. If you put collateral up against your loan, you are telling the bank or lender that, in the event you don't pay off your small business loan, they have assets they can sell to recoup their loss. Only use collateral as part of your loan if you absolutely cannot get a loan or the amount of money you need without it.
As a small business, you want to have the funds you need to help your business grow. Sometimes you need additional help in order to do so in the form of a business loan. Gather your collateral, keep your overhead low, and have a good reason for needing funds, and you may be able to find an institution who will be able to assist you. Click here for more information.
Share8 October 2015
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