Most small businesses will need a loan at some point. Whether they need to get things off the ground or expand, financial backing is essential. Getting approved for the loan, isn’t always so easy however. Underwriters can get picky about who they lend their coins to, but the feat is not impossible. Here’s what to consider so you get approved.
Your Credit History
Underwriters are trained to skillfully assess the risk factor associated with lending to you. Credit history holds weight in any lending process, and business loans are not exempt. Credit bureaus like Equifax and TransUnion can give you a free credit report once a year. It’s not difficult to find third party sites that offer you insights into your FICO score as well.
If you find that your score falls below the 680 threshold, you may want to work on rebuilding your credit before applying for a business loan. Alternatively, you can consider non-profit microlenders and small business loans for people with less than stellar credit.
Thorough Financial Statements
Be prepared for underwriters to scrutinize your financial statements. Lenders are detailed by nature and they will undoubtedly make sure you’ve cross your “T’s” and dotted your “I’s.” Be sure your documentation is complete and thorough beforehand. One discrepancy can leave your application susceptible to even more inspection.
Consider having your accountant review your financial statements ahead of time. This will ensure accuracy and also prepare you for specific questions lenders may have about your documentation.
Your Online Presence
It’s not uncommon for employers to scope you out your social media profiles before calling you in for interviews. Today, loan underwriters are joining in on this screening tactic.
A business loan lender might review any and all information about you and your business that is available online for public consumption. Refresh your company’s website and social media profiles for a professional look to ensure your business appears reputable. Address reviews about your company on platforms like Yelp. Lastly, make sure the principal owner is maintaining a social media presence that reflects well on your company.
Cashflow and Longevity
Do you make enough money? And, how long have you been in business? These are questions lenders will most certainly ask when assessing your application. You need to have been in business for at least two years for most banks to take a chance on you. Most lenders require an annual revenue minimum typically between $50,000 to $150,000. Find out your lender’s minimum requirements in advance.
Cashflow shows underwriters that you are capable of making repayments. Lenders are looking for your income to be 1.25 times your expenses. Sites like Nerd Wallet have a business loan calculation tool to help you understand where you fall.
Enthusiasm and Vision
Loans are competitive! Make sure you’ve demonstrated passion and a compelling reason to lend YOU money, over another borrower. Now is not the time to be apathetic. Including forecasting and a business plan with your application may allow the lender to see the bigger picture!
If you think you’re ready to apply for a business loan, contact us to get started!
Bob E. Teittinen
Commercial Lender, Senior Vice President