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Thursday, January 23, 2014

Eight ways small businesses can simplify the loan approval process

By Francis Santos

There may come a point when a small business needs to secure a loan. It's a common process in the SMB community, but acquiring those funds is no piece of cake. While the slumping economy helped lower interest rates to record degrees, it also put an icy freeze on the credit market. As a result, getting a loan has become a daunting task for just about anyone, but especially the small business owner that is often asking for a nice chunk of change.

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When it comes to securing a small business loan, nothing is guaranteed. On the bright side, there are a few things you can do to simplify the application process and improve your chances of securing an approval.

1. Make sure you're eligible. As you probably know, a business must meet certain qualifications in order to be approved for a loan. Credit rating is definitely factored into the approval process, so take a close look at your credit report in search of potential red flags. It's also recommended to have your taxes in order. Any money you owe to Uncle Sam could haunt you by holding up the process.

2. Come up with a good plan. A plan is not only critical to getting your business off the ground. It's essential to securing a loan as well. This plan should show lenders that your business has the cash flow, collateral, and viability to thrive once the funds have been disbursed and beyond.

3. Choose the right bank. One of the biggest mistakes a small business owner can make in hunting down a loan is thinking all banks are the same. The fact of the matter is that many institutions narrow their focus to certain niches. For example, some banks cater to businesses in the construction industry, while others prefer to work with more established companies. Instead of applying at every bank in town, take some time to figure out which institutions are likely to lend to small businesses in your situation.

4. Narrow your focus. As a small business, you would probably have much better luck with a small community bank opposed to a large global or national institution. These lenders operate in your community, so there is a great chance they will be familiar with your market and the audience you're trying to reach. Get in touch with your local chamber of commerce to see if they can point you in the direction of institutions who specialize in lending to businesses in your vertical.

5. Play with a few options. Once you find a couple of lending institutions that specialize in your type of business, pick about five of them, and start your journey at the one that looks the best. If you're lucky enough to get an approval, continue to navigate through those five options to see if you can secure the best interest rate. Far too often, small businesses end their search after receiving their first or second approval. Exercise a bit of patience, and you may get even better results.

6. Supply the right information. The information you need to supply to a potential lender will largely depend on the industry you operate in. If you're trying to secure a loan for real estate construction, you're going to need to provide info regarding the cost of land, taxes, and the total project itself. The information varies from business to business and lender to lender, but the point is that you should be prepared to gather the right details so the process goes as smooth as possible.

7. Seek small business resources. There are a lot of helpful resources small businesses can track down beyond their chamber of commerce. Many of them exist online. For example, SBA.gov has a plethora of information on small business loans, including details about different programs, learning tools, community support, and much more. The more you know, the better your chances of acing the application process.

8. Prepare for the interview. When applying for a loan, an interview often follows the application.
Make sure you're ready. The interviewer will be asking an array of questions about the information on your application. They're goal is ensuring that they have everything needed to decide whether or not to take a gamble on your business.  Be prepared to back up those claims with facts.

Many small businesses have received a nice push from a loan. While economic circumstance has made securing one more challenging than ever, it's not impossible. With proper planning and optimal use of available resources, your chances are as good as any other business.

About the author: Francis Santos is the Marketing Manager for Benchmark Email. He graduated from Cal State Long Beach and holds a degree in Journalism. In addition, he is also the executive editor for separate popular news blogs. Follow him on Twitter: @emailfrancis