5 Tips to Better your Chances at Getting Financing for your Small Business

Every business needs financial backing to ensure it takes off on the right foot. However, small businesses and new businesses find it a bit more challenging to secure finances. Why is it harder for small businesses than well-established companies to secure a loan? Simply because they are well-established, and financers trust these organizations more. That doesn’t mean it’s impossible to secure a loan for your small business. It just means that you need to approach this matter methodically and thoroughly.

No matter who or where you intend to procure a loan from, these tips will increase your chances of securing it for your small business.

1.  The basics:

Pinpoint the exact reason you need the loan. Ask yourself how this loan will help your business, and how and where it will be used.

Once you understand why you need a loan, the next part is to decide the right type of loan from you. Don’t assume that your bank will offer the best terms. There are several options you can choose from - loans, credit unions, crowdfunding, equity investors and even family and friends. Choose a business loan based on your company’s needs.

Research on the best lenders near you and compare their offerings. Consider the amount of loan you will get and the terms and conditions of the policy. Choose at least a few companies that meet your requirements.

Also Read: 8 Best Alternative Lending Solutions for Small Business Funding

2. Ensure you are insured:

Financing/lending institutes have more faith in insured organizations than organizations that are not insured. So, when you are insured, you have more chances of getting a loan. Professional liability insurance can protect your company against lawsuits when clients accuse you of negligence, undelivered services, and work mistakes. Professional liability insurance covers all costs related to the case, including settlement and judgment-related costs, as well as legal expenses.  With professional liability insurance in hand, your business has increased credit and reputation when it comes to getting loans.

3. Make your case:

Now that you have done your initial research, the next part is to present your case to these money-lending agencies and make a very strong case on why they should lend you money. It’s not as simple as voicing your thoughts and opinions out loud – you will require to have a detailed, the well-written plan that has all the necessary information about you, your the company, the product/services you provide, your financial situation, why you need the money, how it will be used, and a contingency plan for if the business does not take off.

4. Ensure your financial statements are in order:

The bigger the loan required, the more carefully will your financial statements and accounting records are reviewed. So, ensure that all your financial statements are complete, correct, and thorough. Look at your balance sheet, income/loss statements, as well as your cash flow statements. Check for discrepancies.  Lenders will thoroughly scrutinize and analyze your gross margin, accounts payable, cash flow, accounts receivable, and every other information related to your finances. If your financial statements have been audited by a certified public accountant, lenders will look at your case with a more positive outlook.

5. Gather all the relevant information for your loan application:

Here is a list of information that must be included in your application to increase your chances of procuring a loan.

       ·         The name of your business (include any DBAs)

       ·         Federal Tax ID

       ·         A detailed list of executive officers along with their background

       ·         The legal structure of your organization (LLC, S or C corporation)

       ·         Financial statements for the past three years

       ·         Projected financial statements

       ·         State filings for your company

       ·         Copies of general and professional liability insurance policies

       ·         The amount of loan you require

       ·         Potential collateral for the loan

       ·         A business plan

       ·         Your company’s tax returns for the past three years

       ·         Business bank statements

Follow these tips, and you have more chances of procuring a loan for your small business.