3 Tips for Getting a Loan for Your Small Business

Securing a loan is incredibly common among small businesses, yet it’s one of the most challenging steps in becoming a small business owner. Nevertheless, it’s often necessary for entrepreneurs looking to get their business off the ground. Having access to capital can make all the difference in growing your operations. 

However, getting approved will require a considerable amount of preparation and strategy. Not to mention, you’ll need to have a clear understanding of what’s going on in a lender’s mind. To help you navigate the process, here are five practical tips you’ll need to know for getting a loan for your small business.

Understand Why You Need a Loan

Don’t make the mistake of taking out a loan just for the sake of it. You should have a clear list of everything for which you require funding. Before you even approach a lender, make sure you’re crystal clear in your presentation about why you want to seek financing. For example, are you trying to cover your startup costs, expand your team, or make up for seasonal cash flow gaps? 

Every reason requires a different type of loan, which is why a lender will expect you to clearly articulate the purpose of the borrowing. Perhaps most importantly, you need to be able to spell out how you plan to pay them back. The more specific you are, the stronger your case will be when presenting your request to lenders.

Check Your Credit Score

Your creditworthiness is one of the first things lenders are going to look at. That’s why your credit score should be checked ahead of time. Generally, a higher credit score doesn’t just mean you’re more likely to be approved—it also means lower interest rates and more loan options. 

Before you start applying for loans, review your credit report for errors or areas for improvement. Pay down any existing debt, and avoid opening any new credit accounts unless absolutely necessary. If your business is new, lenders may rely heavily on your personal credit score, so keeping it in good shape is critical.

Get Your Documents Together

Preparation is everything when it comes to applying for a small business loan. Lenders want to see that you’re organized and reliable, so you’ll need to make sure you have all of your documents in order. You should have everything from your bank statements and tax returns to a thorough business plan. The more up-to-date and accurate these documents are, the easier they’ll be to understand and review. Having this information readily available—without the lender having to ask for it—will speed up the entire process and build lender confidence.