The Secret to Securing a Business Loan

How to get small business loans

It’s hard to believe, but in the next 30 days, 543,000 new small businesses will open in the U.S. They’re the lifeblood of the American economy, providing 65% of all the new jobs created since 1965. But what’s supporting those businesses? Many small businesses choose to take out commercial business loans. About 38% do so to maintain inventory, and 23% because of poor or slow sales.

Applying for a business loan and actually getting one are two totally different matters, though. Small business loans can be challenging to secure, especially for businesses with few assets or a vague business plan. If you’re submitting a business loan application, it is critically important for you to understand the basis on which loans are given. So what will decide whether you’re granted a small business loan? The Small Business Association has a few suggestions.

The Must-Haves

There are three major factors taken into consideration for commercial business loans:

  1. Ability to repay. You need sufficient assets, reserves, and personal collateral to make it through business fluctuations and still be current on loan payments.
  2. Solid cash flow. If you’re an existing business owner, you’ll have to prove that you can repay the loan with record of past success.
  3. Profitable track record. If you’re a new business, you’ll need to demonstrate a track record or success in a similar endeavor

Serious Preparation

Commercial business loans are extended to those who can show solid business plans, good personal and business credit, and a little expert help. Before you apply, take care of those areas with this path to preparation:

  • Build a business plan. The SBA has a tool for building one online that walks you through the essential elements.
  • Straighten out your credit score. Know what it is so there aren’t any surprises, and do what you can to improve it.
  • Talk with an expert. There are plenty of small business groups that can help you through the process of applying for a loan.

Ultimately, showing that you’re a good candidate is about demonstrating that you’re a reliable risk. Put yourself in the lender’s position and do your best to assess yourself objectively. If you can manage that, you’re in a good position to fill in the blanks and submit a solid business loan application. Continue your research here.

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