Tips for Mastering Your Small Business Loan Application

As indispensable as it is for a small-business owner to have working capital, obtaining a small-business loan can be a challenging task. New entrepreneurs aren’t always confident in their ability to navigate the loan-application waters, but there are a few tricks that will help a new business to get the capital they need. If you want to get money now, the following tips will help you get started to master your small business loan application:

Find the Right Lender

One thing that borrowers almost always get wrong is forgetting that they are the customer of the lender. Unless you have such bad credit that you are struggling to find a lender to approve your loan, this means that you have the power to walk away from any loan deal that doesn’t fit your needs. While it can be tempting to take the cash and run from the first willing lender it is essential to understand the cost of fast money. Typically, except for those with more credit than God, the faster the cash, the higher the interest rate you will pay.

Resist the temptation to go with the first lender willing to grant you approval and shop around until you understand all your options. If you have fantastic credit and you have multiple borrowing options then you can use that to your advantage by pitting lenders against each other to get better loan terms. Be sure to ask any potential lenders for references from past borrowers or check online reviews of specific lenders, if available. Irrelevant of what lender and the interest rate you end up with, just be sure there isn’t a penalty for paying off the loan early.

Find a Mentor

Consider finding someone who has successfully gone through the small-business loan process. While it is common practice to get an advisor to help you effectively allocate your capital, very few small-business owners seek advice during the loan process. If you don’t know some who has personally gone through the process you can ask your local small business association for a referral.

Be Honest and Aware

Always be completely honest about any past financial miscues. It is simply not worth the effort to try to hide credit problems, as the truth will come out. Being honest will speed up the process, for better or worse. However, you should always include an explanation as to the reason you have a bump in your credit history. Lenders are there to make you a loan, but you have to show them you are trustworthy. Writing a personal letter to the bank manager for a loan with specific details about past money problems can be tremendously helpful.

Be Organized

All lenders will invariably want the documents to back up any financial statements you make on your application. Any application you submit that doesn’t have the required documents will sit in a drawer until the lender receives all the requested documents.

Be Proactive

Even if you feel your financial house is incomplete order it is still possible you missed something. Being honest and pointing out any areas that you even think could be an issue in your loan application letter will help build a trusting relationship with your lender and can actually help you get approved.

Create Your Plan

One crucial step is to draft a carefully crafted business or marking plan, as a well-thought-out plan can make or break your loan application. Once you get approved it is important to stick to your business plan. While it may be tempting to spend the money elsewhere, such as on unexpected personal expenses, misallocating business funds is not only a recipe for disaster for your business it can also damage your chances for future funding.