Forget every article you’ve read about what you need to know or do in order to be approved for small business loans. Those articles only apply to certain borrowers or lenders, meaning they contain advice that is basically useless for many business owners in need of funding. The truth is, every step you take before applying for a small business loan depends on the lender you consult. If you choose the right lender for you (and we’ll get to that in just a bit), the preparation process is much less tedious than it would have been had you taken another route.
But before you even contact a potential lender, you must ask yourself a series of questions in regards to why you are applying for business loans in the first place. All businesses could use a little extra cash, so don’t bother trying to figure out whether you really “need” a business loan. Many unsuccessful loan applicants, however, were apparently unclear about the purpose of small business loans along with which types of businesses receive them.
Here’s how you can determine whether or not your business will be approved for funding:
AM I LOOKING TO INCREASE REVENUE?
You’d be surprised as to how many business owners are still under the impression that small business loans are granted to floundering companies purely looking to survive. These companies can barely afford to pay their bills and their employees. They believe a loan will put them back on track despite having no evidence to support this outcome. Most of the time, the only clear evidence is that the business was never “on track” to begin with.
Yes, business loans are a form of assistance but only for businesses that have earned it. The businesses that are approved for loans possess track records proving their success. Demand is on the rise thanks to their solid reputation as a reliable source for their products or services. The additional funding they are applying for will be used to satisfy and/or increase this level of demand. They aren’t asking the lender to help them “get by.”
The purpose of any small business loan is to increase revenue. Even working capital loans, which are designed to cover operational costs, are only meant to be taken out if the business’s spending money is tied up in an expense that will satisfy a high level of demand, such as purchasing new equipment or taking on new hires.
DO I HAVE STATISTICS TO SUPPORT MY BUSINESS PLAN?
No matter how great your idea may be, it is meaningless without statistics to back it up. When applying for SBA and traditional bank loans, your business plan must include previous data about your business and industry to prove why your desired investment makes sense at this specific point in time. Have other successful companies taken similar measures? Is this investment vital to prevent falling behind in your industry?
The intended result of the investment must be backed up with extensive data explaining how it will help your company in the long run as well as how long it will take to increase revenue. If you are not already an expert in your industry, conducting all of this research will do the trick. So in addition to what is on paper, you will impress your potential lender with your tremendous knowledge of your industry. Business lenders are naturally more inclined to approve borrowers who sound like they actually know what they are talking about and have clearly done the work to make sure this investment is a safe bet.
AM I APPLYING AT THE WRONG TIME OF THE YEAR?
One of the most common reasons businesses are rejected for financing is not having enough money in the bank. Many small businesses, even those that are very profitable, experience cyclical dips in revenue or are forced to cover expenses before they get paid themselves. This gives the impression that more money is going out of the company than coming in. No lender will approve a loan for a business with weak cash flow because it suggests the business is struggling to cover rent, payroll, and costs for vendors/suppliers.
Business lenders want to see financial statements to determine that the business has plenty of money in the bank left over after covering these expenses. This will not be the case, however, for any business that is currently in its slow season or has just ordered expensive equipment or a large amount of inventory. Even an upscale medical practice can appear to be struggling due to outstanding insurance payments. You should only apply for small business loans if your business is not dealing with a decrease in sales or a tight budget.
AM I CONSULTING THE RIGHT BUSINESS LENDER?
Friends don’t let friends ask banks for loans. Approval for a bank loan requires a perfect credit score and collateral, both of which are not possessed by many responsible business owners. The terms are generic and non-negotiable, regardless of the inevitable circumstances of your industry. You can forget about having cash on-hand anytime soon since it takes months for the bank to process your application and nearly double that amount of time to distribute funding.
None of these obstacles stand in your way if you consult an alternative business financing company like United Capital Source. You don’t need a perfect credit score, collateral, or even a personal guarantee. Borrowers are judged almost entirely on the performance of their businesses, which is assessed via a minimal list of financial documents. Approval can be granted in 24-48 hours and funding will reach your bank account in a matter of days.
The business funding experts at UCS have experience lending to countless industries, from fitness centers to liquor stores to construction contractors to medical practices. This experience has allowed UCS to design funding programs based on the unique dilemmas of virtually any industry. UCS will figure out which terms are right for you and provide crucial advice for maintaining a steady budget throughout your investment.
If you can answer “yes” to all of these questions, you have done everything you need to maximize your chances of approval. Still a little unsure about your investment? Call 855.933.8638 or visit the UCS website. A loan expert will be happy to walk you through the process of applying for, using, and paying off your small business funding!