There are many factors that dictate the underwriting process and its success when applying for a business loan. These factors vary by lender, state, and a number of commercial variables such as your revenue & industry.
Below, we have collated some top tips on ensuring your business is presenting its best foot forward when it comes to credit applications.
Step 1: Build and check your personal and business credit
One of the main factors most lenders use when choosing whether to grant a loan or not is credit score. Some lenders use your business credit, some use personal credit and some may use both. Before you apply for a loan, it is important to check both these credit scores to make sure there are no surprises.
If you have a low business or personal credit score you can work on building credit or look for lenders who are able to grant loans to someone with your credit score. Just keep in mind that lenders who offer to finance people with lower credit are likely to charge higher interest rates and/or more fees.
Step 2: Look at lender qualifications
Every lender is different so make sure to review the specific underwriting requirements each one has. Some lenders require your business to meet a certain monthly revenue target, others may specify that your business has been running for a minimal length of time.
By looking into what each lender’s requirements are, you can understand if you are likely to qualify for a small business loan before you ever apply. Knowing the rules will also save you time because you can find lenders whose qualifications you can already meet.
Step 3: Get your information in order
Most lenders will require your EIN, information on how much revenue you earn monthly, banking information, and potentially some legal documents about your business. Before you start an application, gather as much of this as you can. Some newer online lenders, like Idea Financial, do not ask for legal documents but the other info should be close at hand when you start your application. This just speeds up the process and makes applying much easier.
Step 4: A business plan
More traditional lenders may require you to submit a business plan. If you are working with a bank or credit union you will most likely be asked to prepare a plan for your meeting that demonstrates the viability of your business.
It is important to make sure that the business plan you submit is well written and clearly shows how you will generate enough revenue to pay back your loan without negatively affecting your business. You may also want to put together a presentation and practice it before your meeting. This is extremely helpful as it will allow you to formulate your answers and identify any holes in your pitch.
Idea Financial has a fully online application process that does not require any business plan or collateral to apply. You can fill out our application in just a few minutes and we will help get you the financing you need quickly. We also have dedicated business advisors on hand to answer any questions you may have.