If you are running a small business, and want to get your first small business, here are three steps that you can take before you apply for your first small business loan to improve your chance of getting approved.
Show A Manageable Debt Load
First, you need to show that you can manage the debt that you have right now. You need to show that you have been able to make all of your payments on time and that you can handle making the additional loan payments that getting approved for a small business loan would put on you. It is vital that you show that you can make the payments right now, based on what you are currently bringing in with your business.
In addition, it helps to show how you will use the money that you get from your small business loan to increase your overall revenue and thus increase your cash flow in the future. Have a written plan on how you plan to invest the money. This will demonstrate to the bank that not only can you handle paying the extra debt now, but it will be even more manageable for you to pay it in the future.
Show A Steady Cash Flow
Second, you need to show that your business is able to maintain a steady cash flow, even after you have paid your employees and your creditors. Demonstrate through financial documents how you keep your cash flow going; you can do this through banking statements, tax returns and financial statements that you have your accountant prepare for you. This should show that you have a historical record of bringing in cash on a regular basis. If your cash reserve dipped at any point in time, be prepared to explain the dip, why it will not happened again, and how you handled it.
Show A Steady Payment History
Finally, it is vital that you show that you have a history of paying down debt on time. You need to make sure that you pay all of your loans on time. The bank will probably run a credit report on your business. You may want to run a credit check yourself a few months before you apply for a small business loan to ensure that your credit check is accurate. You want to give yourself time to correct any errors that you may find in your business's credit report.
By taking the three steps above, you should be able to improve your chance of securing a small business loan. You should also consider working with a financial advisor who specializes in small business finances to further increase your chance of getting a small business loan and to improve your overall financial health.Share