10 hacks to get business loan to your small biz

In the growing business world, we see a lot of start-up companies looking for a market place to survive and win through the competition. For this, a lot of funding and resources are needed. Acquiring financial stability and resources is the most important step in taking your small business to the next level.

Many small businesses flutter in the process of finding these resources. When you acquire a loan, a business loan agreement is prepared where all the terms and conditions of the debt are mentioned.

This business loan agreement is made based on the information you provide to the lender about your biz. So the key to your success will depend on the information you gather about your own business and its needs. Here, are 10 simple steps that will support you in gathering the required financial resources and getting business loan agreement right.

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Follow these 10 simple steps to get business loan

1) Ask Yourself Why You Need the Money

Being clear about your motive is essential when you are raising funds. It is important to give a transparent project report on how you would be spending the money and why you need that money for the said purpose. The following are a few points that help you answer where you need the funds:

  • I need the funds to start my business.
  • I need the funds for the day-day revenue expenditure.
  • I need the funds to grow my business to the next level.
  • I need this fund to repay all my debts.
  • I need this as a consolidated fund etc

2) Building Your Financial Profile

Showing that you make a good income from your business line is a must when you’re seeking funds from the lenders. The lending institutions shall assess you based on your potential to make money. It is always advisable to get your numbers straight and apply for the funds. It is also necessary to carefully estimate your cash flow and evaluate your pitch for funds according to your ability of monthly repayments. Your credit score/credit review shall help the lenders gain trust in you and add it to the business loan agreement with the repayment term clause and lend you immediate money.

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3) Collateral

Collateral is one essential clause in the business loan agreement. What could you give the lending institutions in return if your loan defaults? Do you have any tangible guarantee for the lending institutions, so they trust you and lend you the funds? Usually, most of the banks and other leading lenders would require something of value to shield themselves. Assets like buildings, inventory, vehicles, equipment, and accounts receivables can account for typical business collateral.

4) The Age and the Nature of the Business

If you have been running your business successfully for several years, it is proof that your business has been accepted by the market. This would help you get your funds easily. However, start-ups don’t have this benefit because it takes years to build that credibility. Also, the nature of your business plays a dominant role in improving your chances of getting the funds.

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5) Research Your Options

There are various loans available out there. It is a pre-requisite to research the different types of loans and choose what is right for your business. Choosing a lender with viable interest rates and repayment capsules are important aspects of your business loan agreement. Here are some of the loans in the market:

  • Bank loans: Bank term loans are viable for established businesses as they have proper collateral and credit scores required by the banks. After qualifying for the bank term loan, business owners receive a lump sum of money from the bank, which they’ll repay over an agreed period with interest.
  • Medium-term loans: These loans have a payback schedule between 1-5 years and offer a relatively smaller amount of money with a fixed rate of interest. This type of loan is good for established businesses with proper credit scores and collateral.
  • SBA Loans: The USA’s Small Business Administration partially backs SBA loans to help out small businesses that had been turned down earlier, although the loans are provided by online lenders and commercial banks. They have low-interest rates, but the application process is time-consuming and exhausting.
  • Business Line of credit: Like a credit card, it is flexible compared to the actual bank loans. This loan shall give you access to funds as much as your credit limit will allow and once you keep paying back the amount, you can withdraw more. Also, the interest is paid only on the amount withdrawn.

6) Choose Your Lender

Reviewing your borrowing options is very important in the process of getting the funds. Doing your market research on which type of lender is beneficial to your business would help you get better access to funds. Scrutinizing the terms and conditions of each lender’s business loan agreement is also essential. Direct lenders, peer to peer lenders, online lenders, brokers, etc. are few types of borrowing options you need to go through before deciding on your suitable option.

7) Preparation of Proper Financial Records

Business and personal financial statements, Credit report, Tax returns, Business plan or project report, Business forecast, State registrations and licenses, Legal documentation (articles of association, commercial leases, franchise agreements, etc.) are to be presented to the lenders to analyze your financial stability.

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8) The Current Debt of Your Company

Presenting an idea about the total debt of the company and the scheduled repayment of debt with interest would help the lenders have a good idea that you would reimburse the new debt taken.

9) Taking Appointments and Presentations  for the Project

It is always better to take a prior appointment with the lenders for a business meeting to prepare yourself and the bankers with your details. Preparing a presentation about the complete project and presenting it in front of the lenders would give you a greater chance of obtaining the loan.

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10) Analysis of Government Schemes

Every Government tries to support the start-up or small companies to grow in their business, in turn, aiding the country in its development. So it is advisable to be aware of the government schemes and subsidies for the benefit of the business.

Final statement

I hope these all 10 steps are helpful for you to get business loan for your dream business. Best of luck.

Jessica Rose

Jessica is an academic and professional content writer. She has created engaging and generally acclaimed content in the world of business and finance for dozens of websites. She's had a rich experience with the internal operations of several leading businesses, making her one of the experts in the field.

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