Improve Your Chances of Getting a Small Business Loan

If you’re a small business owner with great plans for growth then a small business loan could be the key. There are a number of advantages to this type of lending, including:

• Quick and easy to apply for/draw down
• No restrictions on use
• You don’t need to be a hugely profitable company to apply
• Available to businesses from all sectors

You may have applied in the past and not had much success, or you might be looking for the right way to approach a first time application. If you want to improve your chances of getting a small business loan there are a number of key questions to cover.

How does a small business loan work?

Your business is assessed on its potential and ability to repay the loan. Lenders aren’t like investors who want to stay with your business as it grows, their primary focus is ensuring that you’ll be able to make the repayments. So, if your business doesn’t currently have impressive cashflow you’ll need to be able to show how the loan will change that.

Can I get a small business loan without strong cashflow?

That really depends on the business, its assets, its potential and any other debts. Another key factor is your own credit score. If you have a good credit score then you can guarantee the repayments of the loan on behalf of the company and you will improve your chances of getting a small business loan.

How do I get a small business loan with bad credit?

If your own credit score is not strong enough to support the loan application then you may be asked to find someone else connected to the company who can do so via a guarantor loan. Other options include loans secured against any assets that you have, such as a property. If you don’t have a great credit score then make sure you’ve looked into a few of these other options for bad credit loans before you make your application.

What type of lenders offer small business loans?

This is a key question, as choosing the right lender will have a big influence over whether or not your loan is successful. Most high street banks offer small business finance – if you’re a long time customer then it’s worth speaking to your own bank, as they can offer good rates. However, high street banks don’t take many risks on small businesses so if you don’t yet have a perfect example of a thriving business then online lenders and peer-to-peer financing can offer more options.

What paperwork will I need for a small business loan?

A business plan is the key document for a small business loan application. Your business plan should include information on:

• Who owns the business and what experience do they have?
• What does the company do and why does it add value?
• What market are you in and who are your competitors?
• What steps will you take to find and retain customers?
• What are your figures for the next 5 years i.e. financial performance

If you have a strong business plan and you’ve considered all the options for providing the lender with security then you will significantly improve your chances of getting a small business loan.