10 Tips to Navigate the Business Loan Application Process for First-Time Borrowers
If you're a first-time borrower looking to secure financing for your business, navigating the loan application process can be intimidating.
With a little preparation and guidance, however, you can avoid common mistakes and increase your chances of securing a small business loan.
Keep in mind: This isn’t a comprehensive list of what to do in every application. Also, everyone’s financial situation is different — these factors can drastically change your ability to secure a business loan. Consult trusted professionals and colleagues before you take out a loan for any reason.
Here are 10 tips to help you navigate the business loan application process:
Understand your financing needs: Before you apply for a small business loan, take time to evaluate your financing needs. Determine how much money you need, what you will use the funds for, and what type of loan best suits your needs. Your lender will want to know precisely how the funds will be used.
Check your credit score: Your credit score is an important factor in your ability to secure financing with any lender. Some lenders — like AltCap — have more flexible credit score requirements when compared to banks. Check your credit score before applying for a business loan and take steps to improve it if necessary. Here’s information on how to improve your credit score.
Prepare your financial statements: Lenders will want to see your financial statements, including your income statement, balance sheet, and cash flow statement. Make sure you have these documents prepared and up-to-date.
Gather necessary documents: In addition to financial statements, lenders may require other documents such as tax returns, bank statements, and legal documents such as patents or trademarks. Make sure you have all the necessary documents before you apply. Before applying, you can always ask a lender to provide you with a list of required documents.
Research lenders: Do your research to find lenders that offer loans that fit your needs. Look for lenders with experience working with businesses like yours and that offer competitive interest rates and terms. Ensure that a lender’s terms and rates would work for you and your business’s future.
Prepare a loan application package: Your loan application package should include your business plan, financial statements, and other supporting documents. Make sure your package is well-organized and clearly demonstrates your ability to repay the loan.
Be prepared for questions: Lenders may have questions about your business, its operations, if it has any legal issues, and its financial statements. Be prepared to answer these questions and provide additional information if necessary.
Follow up: After you submit your loan application, follow up with the lender to ensure they have received it and to check on the status of your application.
Be patient: The loan application process can take time. On average, the business loan process takes between 60 and 90 days. Don't get discouraged if your application is not approved right away.
Seek guidance: If you are unsure about any part of the loan application process, seek guidance from a trusted advisor such as a financial planner or accountant. AltCap is also here to help you navigate the small business loan process. Reach out if you have questions about an AltCap loan.
By following these tips, you can navigate the loan application process with confidence and increase your chances of securing financing for your business. Remember, preparation and diligence are key to a successful loan application.
