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Small business loans

It is good to have ideas that you would want to see come into reality but having a business is only one part of the equation. Seeing that idea mature into a business is another stage altogether.

Business involves money to run the different aspects of it. Some choose to bask in the only in the ideas that they have forgetting that it will need financing to bring it to pass.

It is admittedly true that the process of going in for a business loan can be a bit unpleasant. Despite this small business loans are important to businesses if they are to meet their everyday financial needs. No matter how small or huge the idea for the business plan is, you would need small business loans to finance it.

Getting approved for small business loans can be hard

To successfully be approved for small business loans, you would have to consider the fact “would the bank be comfortable lending to my business?” If you can answer this question, then you will be able to align yourself properly in order to meet the requirements that the lender is looking for in granting small business loans.

Even after answering this question, the process of going in for the loan can be unpleasant and difficult. One entrepreneur got his business loan after approaching the 60th bank. Now that a very extreme case but the point is: the sooner you start the process of applying, the better it will be so that you can know whether you will be approved for the loan or not.

How lenders determine risk among business owners

The concept of the 3c’s (collateral, cashflow, credit score) in business lending helps lenders determine whether a business is a low, medium or high risk entity that they are lending to. The number of C’s those seeking small business loans tick, will determine their risk and the terms of their loan .

If the business is able to check all 3c’s they are considered as the low risk customers. They will then have access to the right loans and enjoy the lowest rates also. If a business misses one of the C’s, they are medium risk borrowers.

A business that has only one tick out of the 3 will still get the loan but will be placed with the high risk borrowers. This might mean higher interest rate or stringent payment terms making it expensive for the business to borrow. If you are looking for small business loans and you do not meet any of these 3 criteria, you are not likely to get the loan at all.

Businesses also have a part to play in the search for small business loans

First of all, it will be a responsible act on the part of businesses looking for small loans to know which loan product will be right for them. Additionally, they should also look out for several options in order to have the opportunity to compare the offers on the table and to know which option best suits their needs.

This should be done because it is not always the best loans that has the lowest interest rate. To find the best loan that suits your business depends on the time the loans is needed and what extra benefit in terms of revenue that acquiring the loan will bring.

Also it should be a loan that your business can afford to pay back within the allotted period.

Should the case be that a business does not meet a lenders criteria, it does not mean that there are no options available.

You can seek out alternative enders who may even have better options for you than the traditional ones even if you are high-risk. It is recommended that businesses look at their financing needs and how much cost they can take on to make it clearer to choose the best small business loan option.

Increasing your approval for small business loans include the following

1. Build your personal and business credit scores

Small business loans take into account your personal credit score in order for lenders to know how you manage debt. Little things like paying your bills on time goes a long way to affect your credit score. In other cases it is important to check your credit score because there can be some errors. These errors when left to remain on your credit report can be damaging especially when you are ready to go in for business loans.

Before you will be approved for a business loan, you would also need to clean up on your business credit score. A good business credit score and a good personal credit will help you get small business loans faster.

2. Know the lenders minimum requirements or qualifications

When you know what requirements a lender needs from you, it makes it easier to know whether you qualify for the business loan you are applying for. It increases your chances of being approved for the loan.

Without knowing the lenders requirements you will apply for a loan that you do not qualify for.

Lenders will look at your credit scores, the annual revenue and the number of years your company has been in business. Past bankruptcies and delinquencies in student loans for example or other government loans may not allow you to get the loan that you need for your business because you fall short of the requirements.

In some cases if you fail to meet the “tall list” of requirements from traditional lenders, online lenders can be on help. They also require credit scores, cash flow, annual revenue but their requirements are less stringent.

They may be more lenient with a bankruptcy on your credit report or a weak credit score and you can get your business loan faster with less documentation requirements. Once your business has strong finances, you can get good rates from them like those of the bank loans.

3. Have your financial and legal documents ready

Lenders giving small business loans do ask for some financial and legal documents for the sake of the application.

small business loans

They are included but not limited to income tax returns ( both personal and business), your income statement, business license, certificate of incorporation, financial projections and other relevant documents.

All these requirements are to show the legitimacy of the business and for the lenders to know how much you qualify for.

4. You should have a business plan

Lenders who give small business loans do not want to give these loans in a vacuum. They would want to see a detailed plan of how you intend to use the money and for which purposes.

Lenders would also like to see your financial projections and for your business to show how much inflow of cash is expected to cater for current expenses as well as the payment of the new loan.

The business plan is also expected to show how you would increase profits. This gives the lender more confidence in your business and increases your approval for the loan.

Your business plan should include a description of the company, the products you are offering, the management team, promotional as well as marketing and sales strategy, Strength, Weaknesses, Opportunities, Threats (SWOT) analysis. All the above will make you a more credible entity to lend to.

To Conclude

In conclusion, small loans are available to businesses that need the loans to finance ideas or plans that they have for their companies. Even if you are a high risk borrower, small business loans are available but at higher interest rates. Small business loans are key in helping businesses finance their operations and expand.

Disclaimer: All loans offered through this website are subject to credit and underwriting approval. AfterLoans.ca is a lead referral company, not a lender. AfterLoans only works with financial service providers that adhere to Canadian laws and regulations. You can borrow up to $20000. Loans amortization is between 6-36 months. APRs range from 19.99% to 55%. The actual APR charged will depend on the lender’s assessment of your credit profile. For example, on a $1000 loan borrowed for 12 months at 29.9%, the monthly payment will be $97.24; with a total repayment, including interest, of $1166.88 There is also lender’s optional loan protection policy. In the event of a missed payment an insufficient funds fee of around 45$ may be charged (dependent on the lender). If you default on your loan payment plan the lender may terminate the plan and the remaining balance will become payable immediately. Our lenders employ fair debt collection practices, but will pursue the payment of Outstanding debts to the full extent that Canadian law allows.