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What do lenders look for from small business loan candidate? Preparing ahead of time will impress lenders and increase your chances of getting approved at a competitive rate.
Here’s 8 tips to help you secure small business financing:
1. Build a good credit history. Have an active business credit card and make sure you pay off the full balance each month. Having an active credit account demonstrates your history of repaying loans in a timely manner.
2. Make sure your loan application is complete. Many small businesses are denied a loan simply because there application is incomplete.
3. Have good credit references. Strategically list vendors, customers, business partners, and colleagues as references that can recommend your ability to pay back a loan.
4. Incorporate your business as an LLC or C-Corp rather a sole proprietorship. Taking this step will show lenders that you are taking your business seriously.
5. Settle old debts and clear up any late payments. Reduce your balances and don’t max out your credit cards (which can lower your credit score).
6. Create effective communications. Utilize your website to tell your story. Include customer testimonials and pictures of your team. Check your online reputation on Yelp and other online review sites; address any negative reviews or comments. Update your social media profiles.
7. Improve cash flow. Send out all invoices and follow up on unpaid invoices. Create incentives for clients to pay on time or in advance.
8. Contact multiple lenders. Your chances of getting a loan approved will increase if you apply to multiple lenders. Include online lenders, such as Biz2Credit, allow you to streamline the application process.
“To impress potential lenders, a business owner should focus on exactly what lenders look for from candidates. Credit history, collateral, cash flow, loan documentation, business plans, and repayment of previous debts are important for any lender assessing loan applications.”