You’ve decided to expand your business. You’ve hired more employees, launched a new marketing tactic, and have started to widen your market. But in order for your company to truly grow, you need to have sufficient working capital so you can buy equipment, supplies, and even lease a new office. There are many options available for business owners but in order to get the financing you need, you must know about the business loan qualifications that most lenders require.
Sound Business Plan
Your goal is to convince the lender (bank) that you are a serious business and by writing a thorough, well-thought out business plan, you’re able to achieve just that. It should also clearly explain how you plan to use the proceeds of the loan.
Good Credit Rating
If you want your loan to be approved, you need a really good credit history. Find out what your FICO score is because lenders always consider it one of the most important business loan qualifications. That’s because it gives them a good idea of whether or not you are a credit risk or if you are financially responsible. It’s also an element that determines how much credit they can extend and what the appropriate interest rate will be.
Comprehensive Financial Statements
Financial statements refer to your profit and loss statement. Lenders check the accuracy and integrity of your financial statements because these documents are key indicators of how well your business is doing and if your profits can actually enable you to pay off your loan. If you have a very low profit margin, it may be better to apply for microloans to increase your chances of getting approved.
Attractive Personal Resume
Small business lenders also look into your “personal character” so they can assess whether you are trustworthy and will not run away from your responsibilities. Your personal resume should therefore be compelling and convincing. It should include your work history and should distinctly highlight your skills, talents and professional achievements over the years.
Solid Marketing Plan
Having a great business plan is great but it won’t mean much to the lender if you do not have a marketing plan. What is your vision for the next 2-5 years? How do you intend to fulfill your objectives? What marketing strategies do you plan to use? Lenders will want to know how you plan to achieve your goals because these things will help convince them that granting you the loan makes good business sense.
Applying for a business loan has become more difficult through the years in spite of the fact that there are many financing options available to small business owners and entrepreneurs. According to the National Federation of Independent Businesses, in 2010, 15% of small businesses did not apply for bank loans because they believe they would only be turned down by lenders. If you consider that there are approximately 28 million small businesses in the country, that’s a considerable number. If you need capital resources and you believe you don’t meet the standard business loan qualifications, you might want to consider other financing alternatives such as invoice factoring.