What Lenders Are Looking For
You hear a lot of terms in the small business loan world. Sometimes it’s hard to know if one of the terms being mentioned falls under the good or bad category. It’s also hard to tell when a particular word already has a negative connotation attached to it. It can be challenging these days to secure small business loans. Lenders have revamped their criteria for approvals, and getting a loan can be difficult.
Whether your company is just starting out, you want to expand your business, or you are in a pinch, lending institutions are rigorous in their demands. A company that just has just a few assets in their name may find it hard to get a traditional bank loan. Some may not be able to give the lender the reassurance they need that the loan will be repaid. When approaching the lender, you must have your financials together, as well as a solid business plan.
Knowing what the bank wants can be helpful in securing a loan. Remember, they only give loans to those who have the ability to repay. If there is anything in your company’s financials that indicates you may have trouble with the monthly payment, it will be denied. The lending institution wants financial stability, reserves and proof beyond a reasonable doubt. What are financial reserves? Well, they can be personal collateral, assets, stocks and bonds, savings accounts, and the list goes on. If you have assets they can take in the event that you should default on the loan, the better your chances are of getting the loan.
They don’t like to take chances with their money. It’s even harder to get a business loan than a personal loan. All businesses have ebbs and flows. If your company should fluctuate and experience downtime, they want to ensure that you can still pay on your loan. A substantial cash flow is necessary. They will want statements from banks, accounts receivable reports, and anything that can show the business is successful. A track record of profitability is essential. If you don’t meet the criteria of a traditional bank loan, there are alternative ways to get financing.
Some lenders specialize in accounts receivable loans, and there is lending for those with less than perfect credit. Though you will pay more on the interest rate if a business needs to get money quickly, there are options worth investigating. Where there’s a will, there’s a way. If you have money and the ability repay, even though you don’t have a great deal of collateral, there are always resources to get funding. Just be patient, do your homework and don’t give up.