Arranging a small business loan can be a daunting task. By learning a lender’s usual loan criteria ahead of time, however, you can prevent unnecessary stress.
Keep reading to learn more about small business loans, including the five steps for qualifying for a loan.
Is it Hard to Get a Small Business Loan?
Firstly, getting a business loan can be more difficult than getting approved for a personal or home loan, but it may not be as hard as you think. There are various factors that influence the approval of your business loan, including your:
- Background and experience
- Earnings or ability to repay the debt
- Capital, assets, security, or collateral
- Loan objective or requirements
Can You Get a Small Business Loan Without Collateral?
It is possible to get a small business loan without collateral. These are referred to as unsecured loans, and they are provided by alternative lenders. These lenders will examine the strength of your company and approve your application depending on their findings.
This means you’ll need bank statements and, in certain situations, a good credit rating. Your borrowing capacity will typically be determined by your company’s profitability and the length of time it has been in operation.
How Do You Qualify for a Small Business Loan?
Now that you know more about business loans, it’s time to share the step-by-step process for qualifying for a loan. By following these steps closely, you can boost your chances of fast business loan approval.
Step 1: Know Your Credit Score
Personal credit ratings reflect your capacity to repay personal obligations like credit cards, vehicle loans, and mortgages. Personal credit scores are required by small business lenders because they want to know how well you manage debt.
You can easily obtain your credit score online for free.
Disputing any errors in your credit report and making payments on time and in full are quick strategies to improve your score.
Step 2: Calculate Your Annual Revenue
Many lenders will only accept businesses that generate a certain amount of monthly or yearly revenue. The amount of cash flow required is determined by the lender, and will usually require documentation such as bank statements. Here at Zinch, for example, we require over $10,000 in monthly sales for a business to qualify for our online loans.
Step 3: Have Proof of Your Time in Operation
Additionally, most lenders will require you to have been in operation for a minimum amount of time. For banks, this is often at least two years, whereas alternative lenders may require a minimum of six months.
For this step, you’ll need to have documents such as your tax records and business license on-hand. These are vital documents for proving your eligibility for the loan, so having them available can speed up this procedure.
Step 4: Determine if Your Industry is Eligible
Many lenders will base their decision on the industry in which your company operates. In some situations, they may shy away from specific industries that are deemed risky, such as companies that are considered socially unacceptable or have an unpredictable cash flow.
Many lenders won’t lend money to businesses in the cannabis, gambling, or adult entertainment industries, for example.
Step 5: Create or Perfect a Current Business Plan
Many lenders will want to know how you intend to spend the funds and see that you have the ability to repay your debt. They may request a business plan that details your company’s objectives and how you hope to accomplish them. Some lenders may also need a business loan proposal, which explains why you want the loan and how you plan to repay it.
This documentation should clearly show that you will have sufficient cash flow to manage current business costs as well as the additional loan installments. This can increase the lender’s trust in your company, boosting your chances of loan qualification. At Zinch, however, you don’t need a business plan to get financed and you can apply for a small business loan minus all the paperwork.
Where to Apply for a Small Business Loan
Your chosen lender will largely depend on your qualifications, as well as the type of loan you need. There are two main types of lenders, including traditional lenders–like banks and credit unions–or alternative lenders.
Generally, traditional lenders require a lengthy application process that must be completed in person. Alternative lenders, on the other hand, often have a quick and easy online application, as well as less stringent requirements.
Start Your Qualification Process Today
When it comes to qualifying for a small business loan, there’s no one-size-fits-all solution. However, doing your research and preparing correctly can help you acquire the finance that’s right for you.
For loan decisions within 24 hours and funds approved in as little as two days, consider an alternative lender, such as Zinch. We’re a direct lender offering speed, simplicity, and transparency.
Contact us at (714) 500-6622 to learn more about your small business loan options with Zinch. You could qualify for up to $250,000 in just 24 hours.
