[How To] Prepare to Get Approval from the Best Business Lenders
Applying for a business loan is often an intimidating experience, especially for small or new business owners. While on one hand, you are eager to receive the funding that’ll help your business grow; on the other hand, you are cautious not to make a bad decision that’ll have adverse effects on your finances for years to come. Finding out the best business lenders is not the end of it too!
While online application has made the process easier for you, more preparation is needed still to get the approval done swiftly and smoothly. So, if you are looking for business funding for small business or a new one, here are some crucial steps you can take to ensure that your loan application gets approved by the best business lenders.
Step 1: Decide Where to Apply – The Quest to Find the Best Business Lenders
You have two major options here; apply with a local bank or apply online. Both options have their pros and cons. And, it is essential that you have your grounds covered before you make a decision.
So, let’s take a look!
These are traditional funding institutions. For ages, banks, both private and public, have been offering loans to every kind of businesses. While applying with a bank where you may already have an existing relationship can be a comforting idea, there are both sides of the coin.
Advantages of applying for a business loan with your local bank:
- You have the opportunity of meeting the executives face-to-face.
- The interest rates are often lower than online business loan providers.
- You may leverage any existing relationship you have with the bank into getting a better offer.
Disadvantages of applying for a business loan with your local bank:
- Most banks have stringent approval criteria for business loans; so if you are a new business or have a not-so-ideal credit history, the chances of being turned down is high.
- Banks generally take longer to complete the verification process; so the time-to-approval is often high.
Today there are a number of reputed online lenders who can offer you business loans at competitive rate of interest. But, as mentioned earlier, there too are advantages and disadvantages. The best thing to do here is to make an informed choice.
Advantages of applying for a business loan with an online lender:
- Most reputed online lending platforms let you reach out to multiple lenders. This way your chances of approval goes up.
- Generally online lenders have a fast forward loan approval process.
- The application process is much easier compared to that of traditional banks.
- In terms of loan approval most online lenders offer better flexibility over traditional banks. So, new businesses or even businesses with bad credits stand the chance of getting the funding they need.
Disadvantages of applying for a business loan with an online lender:
- The interest rates of online lenders may be a tad higher than traditional banks. However, this depends on a lot of factors such as your credit history, the amount the funding you are looking for etc.
Step 2: Get Your Finance Documents in Order for a Smooth Verification Process
When you are looking for a business loan for a small business or a mid-size one, getting your financial documents in order is essential. Lenders will verify and assess your repayment capacity based on these documents. Here are the documents and information regarding your financial condition that you need to keep handy.
Tax Documents: Tax returns are the most authentic proof of income. So, keep your personal tax returns as well as the tax filing details of your business handy. This way, you can prove that you and your business is in a good position to repay the loan you are applying for.
Credit Score: Credit score is the first thing that any business lender will check. When you are applying for a business loan, the credit score of your business will be under scrutiny. So, make sure to check it with all leading credit bureaus of your country when you are applying for a loan. In case your business is three years or less old, your personal credit score is of vital importance. While a great credit score is amazing for getting the loan approved, many online business lenders offer loans with average or low credit score too.
Step 3: Create a Great Business Plan to Gain Trust
Submitting a business plan is a must for applying for a business loan from most traditional lenders. However, best business lenders online are quite flexible about it. Whether the lender you are approaching wants the business plan or not, submitting it nonetheless creates a lot of trust factor and credibility on your part.
Make sure to create the business plan in the most realistic and data-backed manner though!
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