4 Hurdles to Overcome When Applying for a Small Business Loan

If you need low-cost funds to expand your small business, there are a few things to consider before you look for a lender. Review these four hurdles to improve your chances of approval and make for a smooth application process.Piles of Paperwork

  • Problem: It’s no secret – documentation is always required when applying for outside funds. Of course, each small business loan program has specific requirements but much of the necessary information is the same. If you can’t get your hands on your cash flow analysis, tax reports, legal documents and financial statements, your loan process can be painful.
  • Solution: Embrace organization. Financial paperwork is not everyone’s favorite part of business ownership but you don’t have to go it alone. Hire a freelance bookkeeper or work with an accountant to put systems and processes in place that will make submitting documents painless. If you haven’t embraced cloud computing, it’s a great way to stay organized and get your hands on vital information from anywhere there’s a Wi-Fi connection.

Credit Concerns

  • Problem: Small business lenders will almost always check your credit scores. Banks and other financial institutions usually look at both personal and business credit history. If you don’t have good credit, there are steps you can take to improve your numbers.
  • Solution: There’s lots of information out there about how to improve your credit scores. Check out this guest post from the SmartBiz Small Business Blog. Fit Small Business writer Priyanka Prakash is a business analyst and she shares her credit expertise: What the SBSS Score Is and How to Improve It

Determining a Loan Amount

  • Problem: There’s a formula for determining how much money you should ask for from the bank known as the debt service ratio. If you have not determined your debt service ratio before you approach a lender, you might impact your chance of approval.
  • Solution: Figure out your debt service ratio to help you determine the amount of funds you need to strengthen your business. Review this article to determine you debt service ratio: Debt Service Coverage Ratio – What It Is and How to Calculate It. You can work with an accountant to nail down an amount that will do your business the most good. Another great resource is the SCORE non-profit organization. SCORE can connect you with a mentor (for free) that has experience in your industry. They can guide you on best practices to determine the most helpful loan amount that can elevate your business.

Finding the Right Lender

  • Problem: During the 2008 financial crisis, banks that were supposedly “too big to fail” were not equipped to provide the funding small businesses needed for growth. So-called “Alternative lenders” stepped in with sky-high APRs that can be harmful and stifle small business growth and savings. Business owners who approach banks might find that the amount they need is too small to be considered. If approved, bank loans are notoriously difficult and the process can be convoluted.
  • Solution: Consider working with SmartBiz Loans. We only do SBA loans so we’re really good at it! We work with banks to get you to a “yes” faster and easier. Our streamlined process is fast and easy with dedicated Relationship Managers on hand to provide stellar customer service. (Check out our rave reviews!)

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