10 Tips for Small Business Financing
Here are 10 tips from the Small Business Administration to help you access capital.
- Get Organized. Every lender will need some standard documents to review your loan request and being organized will make your search for financing much quicker. Be sure you have copies of your last three years of business and personal tax returns, have a current profit and loss and balance sheet, and know the terms of any existing business debt. Be sure to stay organized by using this loan package checklist to ensure that you have all the necessary documents to successfully finance your business.
- Attend a Webinar. Get your questions answered and develop valuable lending contacts by signing up to attend a workshop like “Accessing Capital Webinar” on October 28, 10-11:30 a.m. Click here to register.
- Know Your Credit. Your personal credit will be evaluated when applying for a small business loan. Check your credit before you apply so you know what is on the report. You can access your credit score from www.creditkarma.com and receive a credit report from www.annualcreditreport.com. The minimum credit score will vary depending on the lender.
- Determine How Much and What For. Never ask your bank “How much can I get?” This tells the lender you don’t know what your business can afford to borrow, or that you don’t have a plan for the loan funds. Meet with a consultant from the Small Business Development Center to determine an amount and be prepared to discuss how your business will benefit from the loan.
- Update Your Business Plan. A great document that can help you tell the story about your business to your bank is your business plan. Don’t assume the lender is an expert in your industry. Rather, provide them with a copy of your updated business plan that outlines your company’s financials, goals and objectives. Let this business plan guide help you update your current business plan.
- Tell Your Story. Focus on the story of your business to help your lender see the true profitability and potential of the business. Maybe you had some one-time expenses in the prior year that significantly reduced profitability. Your financial statements won’t explicitly state that the roof caved in last year – that’s up to you.
- Know How Much You Can Afford. If you’ve been in business for a few years, you’ll first need to determine how much of a loan to apply for. Meet with your accountant or a consultant from the Small Business Development Center for advice on how much your business can afford to borrow.
- Check Out SBA Loan Guarantee Programs. If you don’t meet the bank’s underwriting criteria under a conventional business loan, you’ll want to ask if anyone in the bank is familiar with SBA Loan Guarantee Programs. The SBA works closely with banks to help small businesses access capital. Check out this quick reference guide that outlines a lot of the key details.
- Plan Ahead. Depending on which loan program you apply for, approval times vary. Credit based products can take just a few days to determine approval. Be careful that you are not paying more for the speed. Fully underwritten loans can take longer – 30-90 days to funding – depending on the lender and how the loan funds will be used.
- Don’t Be Discouraged. You may have to shop your request to several lenders, so don’t be discouraged if you are turned down by one. It doesn’t mean you won’t be approved by another lender.
Need personalized help? Click here to sign up for free SBA consulting.