5 Steps to Take Before You Apply for a Loan
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on Thursday, March 5, 2020
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Whether you need to boost cash flow, purchase inventory, or take advantage of another 
opportunity to grow your business, you will probably need a business loan at some point. Most business owners know when they need to get a loan; however they may not be aware of the important steps they need to take before they apply. Here are 5 steps to make the process of getting a business loan easier.
1. Think about what you need. A lender will want to know why you need to borrow and how you will pay back the funds. That is why it is important to know the exact purpose of your loan and the amount of money you will need. For example, if you need additional funds to purchase new equipment, you should know the cost of the equipment and how it will help you grow your business. You also should determine how you want the funds disbursed – in a lump sum or over time.
2. Review loan options. When you've determined the amount and reason you need to borrow, research the types of loans, the terms available, and the interest rates and fees.
3. Find a lender. There are many lenders in the market today, including online lenders. It's important to find a lender who will take the time to understand your business and work with you to provide the right financing. Consider asking fellow business owners or your CPA or attorney to recommend a good lender that is experienced with businesses like yours.
4. Understand qualification guidelines. You know you need a loan, but what you also need to know is if you qualify for one. For example, if you want to get a Small Business Administration (SBA) loan, review the eligibility requirements to ensure your business and industry qualifies. You should also review your credit score to ensure it meets the qualifications.
5. Gather financial statements. As soon as you apply, a lender will request financial statements for your business. These statements include a balance sheet and income statement, as well as cash flow forecasts. You will also need to provide business and personal tax returns. You can save time by gathering these documents in advance.
Be prepared. It helps. By taking these important steps – before you apply – you can make the application process a whole lot easier.