Small Business Application Tips - photo

You’re looking to bring your business to the next level … or maybe you’re looking to get it off the ground. You’ve got the vision and the drive to see your business succeed, but you’re lacking the funds

Here are some valuable tips to help you prepare for the application process:  to make it all come together. A loan from a knowledgeable, trusted lender can help you set your company up for years of growth and success, but you’ve never applied for a business loan before. What should you do?

  • If you’re a starting a new business, have a business plan

First, we want to let you know that you’re not alone! In their 2020 Small Business Profile, the U.S. Small Business Administration (SBA) reported over 31 million small businesses in the United States.1 When approaching a lender, one thing they’ll need to know is that you have a good plan for the short- and long-term success of your new business. A business plan, if done well, can serve as “a GPS for how to structure, run, and grow your new business.”2 It can also give your lender confidence that there will not be repayment problems with your loan. The SBA website offers excellent business plan writing resources for those thinking about starting a new business.

  • Figure out how much you actually need

While it might be easier to “ballpark” a loan amount request on your application, that approach may not be the best move when it comes to business lending. If you can show your lender that you’ve put in the time and effort to create a budget that incorporates the associated costs and anticipated return on investment (ROI) of what you’re looking to purchase (i.e.: land, buildings, equipment, vehicles), you’ll show that you’re truly invested (pardon the pun) in the lending process and you truly understand your business’ needs.

  • Know your credit profile – personal & business

As you can imagine, business lenders want to ensure that they’re going to be repaid when they make loans. It’s as simple as that. One of the most important barometers of a business’ ability to repay their debts is their credit history. Before you approach a lender and/or complete an application, you’ll want to:

  • Review your personal and business credit history and make yourself aware of any “blemishes” that may cause the lender to be concerned. According to Nav, a company that helps small business owners monitor their credit, their 2019 study suggested that “those business owners who regularly reviewed their profile were 30% more likely to qualify for a loan.”3

  • Show the lender a strong record of personal and business creditworthiness – you maintain an acceptable amount of debt, you pay your bills, and you pay them on time.

  • Don’t underestimate your credit score! Over one-third of small businesses that were denied at least some of the funding they requested were denied because of their credit score.4

There are well-known paid (Dun & Bradstreet, Experian and Equifax) and free (Dun & Bradstreet CreditSignal, Nav and Tillful) online resources for business credit monitoring.5 Click here to find out how to monitor and manage your business credit score today! 

  • Have your documentation ready

Lenders may vary when it comes to what paperwork they request from business loan applicants, but they will likely include things like:

  • Income Tax Returns (personal & business – possibly for the last few years)
  • Accounts Payable / Accounts Receivable statements

Having this documentation ready prior to applying for a business loan may help to expedite the application process and your lender will certainly appreciate your preparedness!

  • Make sure your financial “house” is in order

Now that we agree that it’s important to have all the right paperwork in place before you apply for a business loan, there’s still an important question to ask… Is your (financial) house in order? Ideally, you’ll want to show that you’ve maintained positive account balances in your business checking and savings accounts, which will be a good indicator that you manage your business finances effectively. Also, you’ll want to thoroughly study key documentation about your business, including your income statement, balance sheet and cash flow statements. If you’re unsure of anything, ask your accountant or local lender to review them with you so that you can speak intelligently when you are ready to apply for a loan.

With these tips in mind, you can position yourself well when applying for a business loan. If you have any further questions about business loans, commercial mortgages, business e-banking services, please contact our Commercial Lending team during regular business hours.


References

1.     2020. U.S. Small Business Administration. “2020 Small Business Profile”. https://cdn.advocacy.sba.gov/wp-content/uploads/2020/06/04144224/2020-Small-Business-Economic-Profile-US.pdf

2.     2018, December 10. U.S. Small Business Administration. “5 reasons you need a business plan”. https://www.sba.gov/blog/5-reasons-you-need-business-plan

3.     2019, June 13. Kiisel, Ty. SCORE. “What Does My Business Credit Profile Reveal About My Business?”. https://www.score.org/blog/what-does-my-business-credit-profile-reveal-about-my-business

4.     2020, December 16. Shepherd, Maddie. Fundera.com. “Small Business Lending Statistics and Trends (2021)”. https://www.fundera.com/resources/small-business-lending-statistics

5.     2020, September 16. Johnson, Holly D. Bankrate. “How to check your business credit report”. https://www.bankrate.com/finance/credit-cards/how-to-check-your-business-credit-report/