Small Business Bank Loans: Get Your Loan Approved

If you own your own business, there will probably come a time when you require extra funding. Whether you need money to buy a new building, purchase equipment or just get your start-up off the ground, a small-business loan can give you a leg up. Getting one can be a lengthy process, though, so there are a few things to keep in mind when applying. The following steps will help you navigate the process of getting your loan approved.

1. Develop a relationship with a bank.

It will probably be easier for you to get a loan from a bank if you already have a history with them. When seeking a loan, go with the bank that you have your personal or business accounts with. Get to know your bank manager. The more comfortable your bank is with you, the more likely it is that they will feel good about giving you a loan. 

2. Have your documentation ready.

This step is absolutely crucial. There is a lot of information your loan agent will want to see, so start gathering it well ahead of time. You will need to provide information on your personal finances, such as tax returns and credit statements. You will also need to provide detailed information on your business’s finances. This will probably include monthly cash flow projections and a detailed, well-written business plan. If your business is already established, it is also a good idea to get some letters of reference from your customers and suppliers. The more documentation you can provide, the better. 

3. Be prepared to explain your intentions.

Your loan agent will want to know exactly how you plan to use the loan money. For example, if you want to purchase a building, how will the building be used? How will it positively affect your profits? Be prepared to explain in detail where the money will go, how it will benefit your business and how quickly you think you will be able to repay it. It is absolutely essential that your lender feel confident that the money you want will be put to good use and will be repaid in full. 

4. Provide collateral.

If you can provide collateral, such as your house or other property, you will get a better interest rate. The more collateral you provide, the better your rate will be. Keep in mind that if you default, the bank will take your collateral and sell it. That may sound discouraging, but providing collateral is another factor that will make your lender comfortable. With collateral to back up the loan, the bank feels more confident that they will not lose money. In short, collateral makes you less of a risk.