In a perfect world, you’ll be able to grow your business organically over time, and you won’t need to stress about finding enough money to do the things you want to do. Unfortunately, it’s common for surprises — good and bad — to instigate an immediate need for extra funding.
If you ever find yourself in such a predicament, it’s important to follow certain steps, so you can give yourself the best chance of sourcing the best loan — one that doesn’t leave you paying exorbitant set up fees or hefty interest rates which will cripple your venture. Read on for how to get access to a business loan sooner rather than later.
Always Keep Your Business Paperwork up to Date
You’ll do yourself a favor if you keep your business paperwork up to date. Financial institutions will want to see information about your venture’s financial standing and other bits and pieces before they even think about lending to you. They need to ensure you will be likely to pay funds back on time and in full.
As such, work on paperwork each month, so you don’t fall behind. Lenders will likely ask to check out a variety of up-to-date reports and documents, such as a profit and loss statement, balance sheet, cashflow statement, debtors’ report, financial projections for the next few years and the last three to five years’ worth of tax returns. They may ask for detailed logs of past sales, too, so keep an eye on the merchant account you use to accept payments.
If your business is only quite young, you’ll probably have to produce personal financial documentation since there won’t be much for the lenders to use for your venture. As such, prepare your own tax returns plus a list of assets and liabilities.
In addition, most organizations will ask you to provide a business plan, which shows you have researched your competitors, understand the market and customers you’re selling to and the strengths, weakness, opportunities and threats for the business. A detailed plan will also include how you plan to grow your company, the marketing and sales efforts you will employ and more.
Complete Research on Lenders to Find the Best Fit
Next, try to complete detailed research on lenders in the market before you actually need funding. This way, when the time comes, you will be ready to approach a particular shortlist of firms that are the best fit for your business and current needs.
You want to get the best deal for yourself while also getting a loan quickly, so there’s no point applying for funding from an institution that just isn’t likely to approve the paperwork. While many people only approach their current bank or the lender who is located closest to their place of work, this isn’t an effective method. There are so many options these days, particularly online, so don’t limit yourself.
When you do your research, you’ll quickly see how different lenders have varying rules and regulations and different rates and other charges. Some institutions will be an option for you, and others won’t. Apart from traditional banks, take a look at lenders that specialize in giving funds to particular types of businesses or those in a set industry, boutique online lenders and even investors who are looking for their next project.
Be Clear About How You Need to Use Funds
Lastly, before you start approaching banks or other organizations for a cash injection, think about exactly what you need the funds for and the minimum amount you require. It’s not enough to just tell lenders you want money to grow your business; they will want to understand how the funds will be used to achieve results.
They need to see there’s a purpose for the additional cash and that you’re not just planning to use it to stop the business from going under. Remember: Financial institutions need to get their loan repayments each and every month, for a set period, and they want to feel comfortable that your business will be around for that amount of time.
You’ll help yourself get a loan approved more quickly if you can provide details about how you will spend the money and what results you expect to achieve. List out the various amounts you will spend on different purchases and by what dates you plan to do make expenditures. This will demonstrate how carefully you have planned out your next move and give lenders more confidence.