If you need to apply for a small business loan to get working capital and cover your costs, you may not be sure where to start. We’re here to help! Follow these 5 steps to get the loan that’s right for your business.
Determine How Much You Need To Borrow
First, you’ll need to work out how much money you need to borrow. It’s important to borrow only as much as you need. If you borrow money you don’t need, you’ll still end up paying interest and other fees as you repay it, so you’re throwing money away.
Go through your financial statements closely to see how much money you’ll need to expand your business, buy more inventory, hire more staff, or to cover operational costs at your business.
Check Your Credit Score
You can check both your personal credit score and your business credit score using services like Experian. If you are a new business owner, you may not yet have a business credit score, in which case your personal credit score will be used.
Either way, it’s helpful to know what your credit score is, and what kind of rates you can expect to get with your credit score. Check your score and do a bit of research to ensure you’re properly informed before applying for a small business loan.
Find A Reputable Loan Provider
You can get a loan from a local bank or credit union, a national commercial bank, or even online with certain loan providers. There are a lot of different types of loans, so make sure you choose a reputable loan provider who will help you find out which one is right for you.
Gather Financial Information
Before you apply for your loan, you should collect all applicable financial information from your business. Lenders often want to see documentation like:
- Profit & loss (P&L) statements
- Balance sheets
- Business plans
- Statement of cash flows
- Statement of retained earnings
The lender may want to review this information to ensure that you will be able to repay your loan, so make sure you have all of your financial information close at hand when applying.
Apply For Your Loan
Now that you’ve collected all of your documents, checked your score, found a loan provider, and figured out how much to borrow, you can apply for your loan. It may be a good idea to make a short list of several loan providers to apply with, in case you are not approved by one or more lenders.