You take your small business seriously and you want lenders to take it seriously as well. This means you need to be well-prepared when you apply for funding for small businesses. If you want to raise your chances at being approved for the money you need to begin or stay in operation, it is important to do some legwork before you begin filling out the application.
Create or Review Your Business Plan
Never start your search for funding before you have a solid business plan. If you have never created one, now is the time. If you already have one, review it and improve it where necessary. Your plan should include an overview of your business as well as an operations plan, market analysis, list of products and services, competitive analysis and financial plan. A business plan is especially important if you plan to seek a larger loan because lenders will want to ensure you can pay back your funding when the time comes.
Learn Your Credit Score
Although not all lenders will care about your credit score, it is still important information to have on hand. Doing so ensures you choose to apply for loans with a minimum score within your reach. Get your credit report from the three major credit reporting agencies, look for errors and have them fixed before applying for loans. It is also a good idea to monitor your credit. Each credit agency provides one free report per year, so if you stagger them, you can get a free credit report every four months. While you can find funding for a small business if you have poor credit, remember that you may need to explain why your credit is poor and you will likely pay a higher interest rate because you will be considered a high-risk borrower.
Organize Your Paperwork
Even if you apply for funding for small businesses online, you’ll have at least a bit of paperwork to do. By preparing in advance, you’ll make the application process go smoothly and ensure you receive a response more quickly. The type of paperwork you need depends on the type of loan you are applying for. For example, equipment financing requires a list of the equipment you’re buying or leasing and invoice financing requires you to provide a list of your current invoices. The lender you use will likely provide a list of necessary documents before you begin the application so it will be easier for you to be prepared.
It is very important that you shop around before selecting a lender. If you go with the first lender that seems to have a good deal, you could end up paying a higher interest rate, not getting as much money as you would have somewhere else or even working with an unprofessional company. Some things to consider are how potential lenders rate with the Better Business Bureau, whether they have a lot of negative online reviews or whether they are members of a group such as the Small Business Finance Association.
Regardless of why you need funding for small businesses, always ensure you make your loan payments on time to prevent the loss of funding. Keep in mind that some lenders report failure to pay to your personal credit.