June 9, 2014
A To Z: What You Must Have and Know To Get A Small Business Loan
Legal Documents. These include Articles of Incorporation, franchise agreements, business licenses, and any copies of contracts you might have with third parties.
Arora tells the Fox Business Network, “Many big banks turn away requests for startup loans because of their requirements of providing three years worth of financial data.”
Regional banks and credit unions are a better bet. They get you, the understand the local environment better and are looking to help local businesses grow. If you need cash fast, have poor credit scores, or no credit, you could look into cash advance companies, micro-lenders and Community Development Financial Institutions but they can charge as much as 30-40% interest on the loans.
You can also look into a small business administration (SBA) loan. It can be a godsend for business owners who qualify. These were set up by the federal government in the 1950s, to enable lenders to accept greater risk and encourage the growth and development of small businesses. SBA loans also have lower monthly payments than other options and low, single digit interest rates.
It sounds good, but it’s not easy. Not every small business is eligible. Like other bank options it is also paper intensive and time consuming.
However, you can speed up the process and increase your chances in some of the ways listed above. Remember to keep your documents in order and maintain good credit.
The Small Business section of the Huffington Post also stresses that you should, “Be able to clearly present the use of your funds and the specifics of how the money will be used. Lenders have different requirements on use of proceeds — be sure to ask your lender before you get started.”
Banks also want to see that you have the cash flow to make your monthly loan payments. You’ll need a financial plan that proves you’ll be able to make them.