Starting a small business can be an exciting venture. You get to put your ideas into practice to create a company you believe in. However, the process isn’t easy. It requires time, dedication and of course money. A big part of getting your small business off the ground includes acquiring financing. For many small business owners, this involves getting a loan from a bank or business lending institution which is not always a simple task. Securing financing could determine whether you open your doors or table your business for good.
Here are 3 essential tips to help secure credit when applying for 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 plan to spend the money they will be lending you. Take time to build or update an existing business plan even before you step foot in 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. 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.
Whether you are looking to get a small 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 strived to help countless small business owners turn their dreams into a reality. Contact us today for personalized advice that’s built for your unique business needs.