Small business planning never ends. From the launch of the business to the 5, 10, 15-year mark and beyond – business owners are always looking ahead to the future.
Part of growing a small business often includes securing financing. For many small business owners, this involves getting a loan from a bank or business lending institution. However, getting a small business loan is not always a simple task.
When the economy begins to slow down, banks tighten their purse strings even more. Using these tips can help your small business is able to secure credit whether times are good or bad.
Why Getting a Small Business Loan Is Important
Small businesses must be able to take advantage of opportunity whenever it arises. However, cash flow is not always adequate for investing in new products, people, and equipment. This is where getting a small business loan comes into play. Securing financing could be the key to growing your small business quickly.
Here are 3 essential tips to keep in mind when getting a small business loan:
1. Maintain Your Personal Credit Score
When banks are looking at lending to small businesses, they often look at the finances of the small business owner sitting in front of them. Your own personal credit score could be one of the biggest factors a bank considers when evaluating your loan.
If your credit score is not quite where it needs to be, there are some ways to quickly improve your credit score. Look for mistakes on your credit bureau, pay off any outstanding debt, and keep your debt management ratio low. All of this can have a quick and positive effect on your credit score.
2. Have a Professional Business Plan Ready
Part of small business planning is creating a business plan. This is true even if your business is already established and mature. Lenders want to see what your plans are for your business, how you hope to grow, and how you expect to spend the money they will be lending you.
Take some time to build a business plan or update your existing business plan, even before you step foot into the bank. Simply being prepared and having all of the information on hand will make a strong first impression.
3. Look Beyond Fixed Term Loans
When many people think about lending, they consider a fixed term loan with regular, equal payments. These loans tend to be larger because business owners consider all of the projects they would like to fund with the loan over the next 3 to 5 years. Obviously, a larger loan is more difficult to secure for small businesses.
Another way of approaching a business loan is to look at a smaller operating line of credit. This type of loan is ongoing which means the funds will be available as you pay down the balance on the line of credit. You will have funds available when you need them, and the balance is smaller which makes it easier to qualify for. The flexibility of an operating line of credit may be exactly what your small business needs.
A Big Focus on Small Business Planning
Whether you are looking to get a business loan, start a new business, or gain new skills to make you a more effective leader; we can help.
At Mooney Lyons, our advisors have helped countless small business owners turn their dreams into a reality. Please contact us today for personalized advice that’s built for your unique business needs.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.