Getting a new business off the ground can be one of the most challenging, and potentially rewarding, tasks you may undertake in your lifetime. As most SBO’s know, getting all the required resources to maintain operations is a time consuming and expensive tasks. Even when you have invested significant amounts of time and personal money, it often isn’t enough. Even if you have little to no credit, there is no reason to think that you won’t qualify for adequate financing. Finding a lender of unsecured business loans that will accept you can seem daunting and frustrating. There are only a few simple steps you need to follow to determine how to get a small business loan.
Step One: Get Organized
Before you approach lenders of unsecured business loans, you need to make sure you have all of your paperwork in order. Lenders are going to use this documentation to judge the value of your business, so being professional and accurate is vital. The first thing you should do is check your credit with all of the major firms. Equifax, TransUnion, and Experian are the 3 major firms that track credit. Request your free credit report from each of them, and check it over thoroughly for errors. Have you taken out small business loans in the past? If so make sure your payment history is spotless! Sometimes debts that were paid off still appear, and you can contact the credit reporting agency to have these issues corrected. Next, you will want to make sure you have a detailed business plan prepared. Your business plan is an overview of everything you want to accomplish with your business, and the strategies you will implement to meet your goals. Remember, it’s important to be as accurate as possible. While it may be tempting to slip in a few white lies to make your business seem more appealing, you will be dealing with experienced business professionals who will catch this. An accurate business plan demonstrates that you clearly understand the market, and will make you a more appealing client.
Finally, prepare your financial documentation. This will show the banks the revenues you will be bringing in. it is used to establish your ability to repay the unsecured business loan. A financial forecast should be included as a way to break down the companies future revenue. Use this document to estimate your growth, and to demonstrate that you have a clear understanding of the year ahead of you.
Step Two: Identify Assets
If you have little to no credit, financing agencies are going to be looking at other factors to determine your ability to repay the loan. For example, if you are going to be using the loan to purchase a delivery vehicle, this could be used as a form of collateral. Because the vehicle retains value, this gives the bank something they could repossess and sell if you default. Having collateral helps to reduce the risk you pose to the lender and makes you more attractive. Not all assets have to be a tangible object. Let’s say you wanted to open a mechanics shop. Being a certified mechanic would be a huge asset when applying for a small business loan online. Even though this is not an item the bank can repossess and sell, it is a strong indicator that you can be successful in your venture.
Step Three: Go Local
Major banks often have very tight regulations about who they lend to. Approaching a local bank or credit union can improve your chances of getting financing. When you make your appointment, tell them you would like to apply for a loan under the Small Business Administration (SBA). The SBA is essentially a micro-loan fund operated by the US Government. They supply small businesses with up to $50,000 in funding. Because you have poor credit, they will be analyzing your business plan and current cash flow to determine your ability to repay the loan.
Step Four: Consider the Alternatives
Even if the bank rejects your application, you still have other avenues for small business loans online. If you are financing a product, consider advertising it on crowdfunding sites such as Kickstarter. Not only can this help build publicity for your product, but the pre-orders you get through the site can be used to finance your operations.
If you are unable to secure financing because lenders don’t think you will be able to repay the loan, why not look for free money? There are many funds that offer grants and bursaries to small businesses. See if there are any positive social impacts from your business. Examples would be affordable housing, a positive environmental impact, or even providing employment to minorities. See if there are any grants available locally that finance these types of operations, and make an application. Grants are going to give you money just the same you would get from most of the lenders show on this site. Take advantage of these types of financial options!
Step Five: Build Your Credit
If all of the above avenues have failed, consider the fact that you might not receive financing immediately. In the meantime, you should look over your business plan and see if there is any way you can reduce costs and increase revenue. When you were rejected, you are normally given reasons of rejection for why there was no approval. Be sure to take all of these into account, and see what you can do to address the issues. You should also begin using a business credit card, making sure you make all of your payments in full and on time. Having a strong history of paying your debts correctly will drastically improve your credit. This simple step will help you when applying for a small business loan online again in the future. At this point, you should have a good plan in place to secure multiple unsecured loans. Go ahead and read this again if you still don’t know how to handle the process of applying and handling all the paperwork! Once you’ve gone through the process of improving your credit score it’s going to be time to find a quality online lender! At Small Business Loans Directory, we host a database of lenders that fund unsecured business loans as well as many types of small business loans. Check them out today!