When you are shopping for a small business loan, the most essential questions you will be asked will remain constant from lender to lender. Be prepared to answer the following questions.
- Why do you need this loan?
- How will you use this loan?
- What is your current business debt?
- What is your personal / professional background?
Because there is so much redundancy in the loan application process, there are also many online services who will have you fill out a single form, and will shop your information around for you to dozens of different lenders, bringing you back the best offers.
Your Credit Score
Though lenders will be able to access your credit score without your assistance, it is a good idea to order a copy yourself before you submit your small business loan application. If your business is incorporated, make sure you also order a copy of your business credit report. You may be able to dramatically improve your score if you find any mistakes you are able to dispute.
Be prepared to hand over a resume, especially if you can give details about past entrepreneurship or management positions. Any time you can demonstrate that was spent in a leadership position will make you a stronger candidate for a small business loan.
You may also be required to furnish a criminal background check, educational background, previous addresses, personal and business tax returns for at least three years, and a list of references.
A Business Plan
Your business plan should cover many of the application questions in detail, and should also include a complete set of projected financial statements. There are many business plan templates available online. There are also many local, community resources such as the Women’s Business Centers which are run through the Small Business Association, who will offer one on one guidance in drafting a professional business plan.
Whether or not you are required to provide collateral can depend on a great many variables, such as your credit score. Even with a perfect credit score, you are still more likely to receive competitive interest rates and repayment terms if you negotiate a small business loan which is also secured by some kind of collateral. If you don’t have the financial resources to put down a payment, you may consider offering your 401K as payment. Putting your own valuable assets on the line will demonstrate your seriousness to lenders and make you a more trustworthy candidate.