Many small businesses require additional financing for inventory, employee salaries, daily expenses, and other needs when starting up or attempting to expand. Obtaining a small business loan can be challenging, but preparedness can make the task easier. Here are some steps to take when attempting to get a small business loan.

Know the Purpose of the Loan

Lenders will question your motivation for obtaining a small business loan, so you should be ready with an answer. For example, you may want to start up a company, cover ongoing expenses, have funds aside for emergencies, or finance the expansion of your business.

Consider the Type of Loan You Need

If you’re just starting up, you may be ineligible for a traditional loan because you don’t yet have cash flow to make payments. Instead, you may have to rely on personal loans, crowdfunding, business credit cards, or microloans from nonprofits. Once you’ve been in business for a year or more, you can apply for SBA loans, lines of credit, term loans, and other financing options.

Find a Lender

Approach banks for term loans and lines of credit when your credit score is healthy, you have collateral, and you aren’t in a hurry. Microlenders may be able to help you when your credit score is poor, you lack collateral, or you have not been in business long enough to qualify for bank financing. Another option for new businesses that don’t have collateral is an online lender, especially if you need funds quickly.

Assess Your Qualifications

Specific lenders have different requirements for loan qualification. These include the length of time you have been in business and your credit score. Most lenders also assess your annual revenue and the strength of your cash flow in determining whether you are able to make monthly loan payments.

Prepare Documentation

When you are ready to apply for your small business loan, get the necessary documents ready. These will include legal items such as your commercial lease, articles of incorporation, and franchise agreement. You’ll also need to provide financial statements, bank statements, and tax returns.

For more advice on obtaining a small business loan, contact Commercial Capital Finance.