Many people find the process of getting a business loan to be overwhelming. According to the experts at Lantern by SoFi, “there are numerous types of business loans, many of which are well-suited to people wanting to acquire a business” and it isn’t easy to know which one is best for your company.
The good news is, there are just six simple steps you need to take to get started. Let this write-up serve as your guide on how to get a business loan for your company today.
1. Improve Your Credit Score
If you want to get a business loan, your company must have good credit. Your personal credit score will not affect the outcome of whether or not you are approved for a business loan, but having bad credit can certainly make it more difficult.
That is why improving your personal and corporate credit should be one of the first things you do. To improve your score, only use a small percentage of the credit available to you and pay off any outstanding balances as soon as possible.
2. Business Grants
For free small business grants, you may want to check out the government’s website. The U.S Department of Commerce provides a variety of grants for small business owners. Note that for such grants, you do not need perfect credit or collateral to qualify.
3. Decide on the Type of Loan That Best Suits You
While several different types of loans are available, not all of them will be best for your company. The SBA offers seven different loan programs that may work well with your business’s needs.
For example, the CDC/504 Loan can help finance major fixed assets such as equipment and real estate, while the CCDC/Express Loan is used to make improvements to your business’s current location.
The SBA also offers the SCORE program, which provides training and mentoring services for entrepreneurs trying to create a successful business plan for their company. In addition, there is the Micro-Loans Program that aims to help small businesses in low-income communities with fewer than 100 employees.
4. Select A Lender
Once you know what type of loan your business needs, it’s time to seek out a lender. It would be best if you start by asking family and friends for recommendations as they may be able to lead you in the right direction.
5. Collect the Necessary Documentation
The next step is to collect the documentation required by your lender. Depending on which type of loan you choose, you may need a business plan or financial statement showing how much money your company brings in and spends each month.
If it’s an SBA loan, you will also need to provide personal tax returns for all members involved with the company and documentation of the business’s cash flow. Additionally, you will need to provide a list of all outstanding debts and accounts receivables for your company.
6. Fill Out The Loan Application Form
Every lender is different, so you will need to review the specific instructions for your loan type. However, there are a few things about applying that remain consistent across all types of loans:
- proper business plan before you apply for any form of financing
- Fill out as many forms as possible and provide clear and concise information