There are a number of obstacles that small business owners might face when applying for or receiving a loan. Some variables you can’t control, such as the availability of credit or the current state of the economy. There are four simple steps, however, that can help improve your chances of getting a loan.
1. Before you need money, build positive relationships with potential lenders
Relationships play a big part in financing decisions. You are ultimately the one who has to deliver on the promise to pay and execute the plan, so the more your lender understands and trusts you and your business, the better your chances of success. If possible, try to build a positive track record with one lender.
2. Produce a clearly written plan for your capital
Putting your plan to paper will help you clearly articulate your business’s background, exactly how you will use the capital, and how the capital can help your business grow. Be sure to also include forecasts of sales and expenses to demonstrate that you will have enough cash flow to easily make loan payments on time. An experienced Service Corps of Retired Executives (SCORE) counselor can help you test your business case, sharpen your growth forecast and clearly articulate your growth plan.
3. Make sure your personal and business financials are complete and up-to-date
Even if your business is strong, poorly documented financial statements can cause a lender to lose confidence. If you don’t have a financial background, work with your accountant or small business advisor to understand and prepare both balance sheets and cash flow statements that support your plan.
4. Don’t be afraid to ask for help with your documentation
If you are serious about getting capital on the best terms, it is smart to get the help you need to pull together the right paperwork, rather than leave your documentation to chance. Most loans require a great deal of paperwork, which can be time consuming to complete and hard to assemble. Work with a banker who will assist you with the documentation of your loan and better streamline the process for you.