Would you like to learn how to get a business loan? Most lenders require that you have business credit before they will ever consider you for a business loan. This is because they are nervous about offering financing to you because they are unable to see what your past financial background looks like. They can go off your personal finances but it still won't give them an image of the business finances and how you plan to run the business. To learn how to get a business loan, here are some of the things you need to start with:
Length of ownership
How long have you been in business or how long have you owned the business? To understand how to get a business loan, the lender must be able to see that you have some financial records to offer them. Being in business for at least 2 years reduces their risk load. Even if you haven't had 2 years worth of experience to show them, try to provide financial records that show you have make a net income of at least $50,000 or more. When you offer financial statements, it allows the lender to gauge your cash flow and get an estimate as to how much money you can borrow based on how much you will be able to repay.
Business Credit
The lender must also be able to see that you have a strong business credit rating. You should have a PayDex score that is upwards of 70 in order to acquire the best rates on the loan. Your business credit provides information about your businesses ability to borrow and repay money. To boost your PayDex score, try to pay your bills before they are invoiced. This is the easiest way to show lenders you are a good borrower and you try to meet all of your payment obligations.
Personal Credit
If you do not have a business credit report for the lender to research, they will need to dive into your personal credit report. They want to find out how you have managed your personal finances and debt. If you have a personal credit rating of at least 680 or higher, you will be able to qualify for a loan in no time. The minimum credit requirements vary from lender to lender but they each will look for a borrower that has always made their payments on time and doesn't have a hard time meeting their payment obligations.
Loan Amount
To learn how to get a business loan, you need to be careful about requesting a large loan amount. If you request a large loan amount lenders may be unable to provide you with financing. Small amounts of financing like $10K or less are usually easy for a lender to approved compared to $50K or more. To find out how much money you can qualify for, lenders will ask for copies of your personal and business tax returns, personal and business income statements, and your cash flow projections.
Collateral
How much collateral do you have to secure the loan? The lender will look for a business that poses the lowest amount of risk to them. If your credit is bad, you need to have collateral for the loan as this is the only way to reduce the risk to the lender. Some small business owners choose to use their personal collateral when they are learning how to get a business loan. Using your home or your savings account is a big risk to you but it may be the only way to get a lender to open up and offer you a loan.
Corporate Credit Concepts specializes in how to get a business loan. For more information about how to get a business loan and how it might benefit your business, please CLICK HERE for a free phone consultation.