Ever wondered how to obtain a small business loan?
When starting a business, getting initial capital is necessary to initiate and grow a business or cater for day to day expenses. With the tight lending standards by banks, it has become too difficult to get a small business loan. Therefore, it is good to prepare yourself for the process of finding, applying and getting approved for a small business loan
There are reasons as to why business people may find it necessary to look for financing.
- Seeking a business loan for a start-up
The process of starting a business is hectic and sometimes can be expensive. From renting a business premise to purchasing commodities, there are different initial costs that are incurred. However, with small business loan you can relieve yourself from the hustle.
- Seeking a business loan to cover the low times and high times
This happens for businesses that operates in seasons. Where there are high seasons and low seasons. An example of such businesses are business owners of restaurants that operates along the beach. During winter, such businesses don’t make good money therefore, a business owner can seek a loan to cater for its operations, also during high seasons the business owners can seek for small business loan to increase its stock to be able to cater for its customer’s needs.
- Seeking a small business loan for emergency purposes
There are times where the unexpected happens whereby a business owner needs funds to finance the situation. Example of unexpected occurrence is when a computer fails to function, or when a car breaks down and it is supposed to ferry goods from one point to another. Such situations can lead one to seek for a small business loan, especially when there are no funds set aside for such situations. Therefore, business owners need to set aside some funds to cater for such occurrences.
- To grab a business opportunity
As a business owner, you might come across a business opportunity that when grabbed can push your business in to slightly higher levels and at that point you might have no cash to facilitate the opportunity. Seeking a small loan can be a better solution to this.
These tips can help small business owners to get small business loans
- Identify the reasons for seeking a small business loan.
You need to ask yourself why you need a small business loan so that you know what financing product to go for, which banks and financial institutions to approach. You need also to have a well-established plan to enable you to convince financial institutions or other fanciers for them to trust you with their money. You can do this by developing a business plan.
- Find out where to get your intended small business loan
This is an important step to consider since there are many financial institutions and money lenders and each institution offer different loans under different rates. Therefore, you need to do enough research to help you know where and the type of business loan you desire.
- Get references
Some financial institutions or money lenders will require you to provide a list of about three guarantors or referees. Therefore, it’s good to prepare your friends, workmates or family members before starting the whole process of small business loan application
- Seeking a business loan that you can manage to repay
There are situations where you find yourself in a cross road between how much money you want and how much money you need. Applying a business loan that your business can realistically be able to repay is a good approach.
- Find out the necessary documents and information that are required to seek a small business loan
Different money lenders or financiers may require different documents or information to accept your request and approve your business loan application. Therefore, it is good to put together all the needed documents for the whole process of loan application. This process takes some time but its reward is good in the long run.
The following documents and information are important in the process of small business loan application.
- Business registration certificate
For registered businesses, the chances of getting your loan application approved are higher than for businesses which are unregistered. Financial institutions and money lenders trust registered businesses than unregistered ones.
- Personal financial credit report.
Your personal financial credit history can also deny you a business loan therefore, it is good to clear with all the banks and other financial institutions before considering the process of a small business loan application.
- Put up a list of you surety
List all your personal financial information that can be used as a security for the loan you are applying. Your chances of getting your loan application approved are higher if you provide a better security.
- Provide an overall information about your business activities
This involves key aspects like how your business will operate, where you are planning to invest for the loan applied for and the overall operations of the business. Some money lenders might require other business documentation
At this step, you need to be clear on every required aspect as this will help you avoid any difficulties that might arise in future and will help you get a small business loan very easily.
However, a good idea that can ease the hustle of finding a small business loan is making some savings prior to seeking a loan. This helps the money lenders or the bank or the financiers to be full convinced that you are eligible to pay the loan you are requesting. Savings can also serve as your surety for the loan you are applying for.