Tips For Loan Approval From A Bank
When it comes to starting a business, there is an incredible amount of folklore about whether or not it’s possible without bank financing. Obtaining a small business loan can be difficult, but it doesn’t have to be a nightmare. Coming to the application process prepared can help you easily obtain the capital you need to bring your business to the next level.
That means having all of your ducks in a row and showing the lender that you’re a reliable borrower who will pay back the loan on time.
Loans from the Bank
When it comes to getting a small business loan, you have to put yourself in the shoes of the bank or financial institution that you’re interacting with. So it’s not easy all times. You have to know ins and outs of how to get a small business loan approved. Once you flip the script and look at things from their perspective, you should be able to see your situation in a less biased light.
We will share some easy and useful steps so that you can make it quicker and smoothly. Business News Daily spoke with small business financing experts to find out what you can do to improve your chances of getting that loan quickly and painlessly.
Keep your documents in good order:
When submitting paper for a loan you have to be transparent and full functional. Transparency into the financial state of your business is an absolute must!
The application process will be more seamless if you take the time to keep your financial, accounting and tax records up-to-date and accurate. Make sure your business has a system in place to keep everything organized.
Good credit score is the magic wand
In addition to keeping track of your documents, make sure to pay your bills on time. You’ll have to meet some type of credit criteria, so it’s important to have the best credit possible.
Avoid foreclosures, bankruptcies, charge-offs and late payments. While banks have different credit requirements, good credit is an essential part of the process.
Consider your options
Depending on your credit situation, you may or may not need a co-signer to get approved for a loan with a decent interest rate. If you can’t find a co-signer, you may have the option to get a secured personal loan instead of an unsecured one.
Loan type you need
Once you understand where your credit stands and you’ve considered your options, determine which type of loan is best for your situation. While some lenders are flexible in terms of how you use the funds, others may only approve loan applications if the money will be used for certain specific purposes.
Provide necessary documentation
Depending on the lender and your credit situation, you may need to provide some documentation after you submit your application. For example, you might need to upload or fax a copy of your latest pay stub, a copy of your driver’s license or proof of residence.
Need to understand that different bank has different rules:
There are pros and cons that come along with every lending institution. Large banks are often preoccupied with bigger clients, because larger loans mean larger profits, according to Cole. While they might be willing to finance your business, you could potentially get more attention or more favorable terms at a smaller bank. Shop around.
The fact is, you may be close to being “safe,” but not close enough for a bank. If you’re not the right candidate for bank financing but are still well-qualified for a loan, try what I like to call quasi-banking institutions.
The Self Help Credit Union is a good place to try, as are SBA guaranteed programs. Important tip: if you do go the route of obtaining an SBA guaranteed loan, make sure that your lender has dealt with the SBA before. Don’t be afraid to try multiple places. The more shots you attempt, the more you may land.
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