Has inflation hit your business hard and put you in a position where you think you may be able to benefit from taking out a small business loan?
Many small business owners are looking into taking out these types of loans these days. One recent study found that nearly half of small business owners have taken out small business loans due to inflation.
Before you get serious about applying for a small business loan, though, you’ll need to know about the business loan requirements you will have to meet. Some qualifications for a business loan tend to vary from one lender to the next. But most lenders will have at least a few of the same boxes that you’ll have to check to get approved for a loan.
Learning about the qualifications you’ll have to hit may improve your chances of being able to qualify for a loan in the first place. Find out more about them below.
Solid Credit Scores
One of the first things lenders will do when you apply for small business loans is to look at your credit scores. More often than not, they’ll want to see both your personal and business credit score to see how trustworthy you are with money.
If your credit scores are on the lower side, it might not automatically disqualify you from being able to get your hands on a loan. But it certainly won’t help matters much.
Annual Revenue
A lender is going to want to see that you’ll be able to pay them back the money they lent you prior to giving it to you. So they’ll often ask you to tell them what your annual revenue is.
Your revenue will prove that you have enough money coming in to make payments on the loan you’re trying to take out. It’ll also give a lender some indication of how quickly you’ll be able to repay a loan.
Proven Track Record
There is a reason why so many new small businesses really have to jump through a lot of hoops to get approved for loans. They don’t have a proven track record showing the success they’ve been able to enjoy in their particular field yet.
Ideally, you’ll want to be able to show a lender that you’ve put together a string of successful years and been able to capitalize on your success by turning hefty profits. It’ll give them the impression that your business won’t have any trouble paying back the loan you take out.
Right Industry
If your business operates in a very small and niche industry, that could very well work against you when you’re trying to meet the qualifications for a business loan. It might make it appear as though you aren’t going to be able to make as much money as those in other industries will.
If you work in an industry like this, you had better be prepared to provide a lender with market analysis that shows where your company is headed and how much money you can potentially make along the way. Otherwise, they might see your company and your industry as being too risky.
Business Plan
When you first start getting a business off the ground, you’ll need to create a business plan that outlines every aspect of your company. You’ll also need to put together a similar business plan when you’re applying for a small business loan.
This business plan should include information about your company along with info about what you need to borrow money from a lender for and how you plan to pay it back over time.
Generating a business plan is something that can sometimes take weeks and even months based on how much research you’ll need to do for it. But you shouldn’t let that stop you from coming up with a foolproof business plan that’ll paint your company in the best light.
Financial Records
You can tell a lender how much revenue your company brings in and provide them with other surface-level financial information related to your company. But they might want to dig a little deeper into your financial records.
With this in mind, you’ll need to have your financial records all ready to go just in case a lender wants to sneak a peek at them. You should also see to it that your financial records are going to give a lender the right impression of your company before you hand them over.
Valuable Assets
Does your company have any valuable assets that you could possibly use as leverage when you’re seeking a small business loan? If so, don’t be shy about sharing this with a lender.
Many lenders will look favourably upon those companies that have assets that could be used to provide businesses with asset based lending opportunities. This might be a much better option for your company than a traditional small business loan.
It would be well worth exploring this option if you know that your company has more than enough assets in its name that a lender would find valuable.
Do You Meet the Qualifications for a Business Loan?
Not every company is going to be able to meet the necessary qualifications for a business loan. But even if you don’t check every box listed here, you should still at least consider applying for a small business loan.
Many lenders out there want to help keep small businesses afloat, and they’re willing to think outside the box to get them the funding they need. It wouldn’t hurt to see which loan offers lenders could provide for your company.
Get more tips on how to qualify for a business loan by browsing through more of our blog articles.
