Are you running a small business? Do you want to nurture it further? These may be the common questions, and everyone aspires to business development to get better revenue.
The significant problem that comes in the way of such aspirations is not having an adequate amount of funds to grow the business.
Solutions can be many, but perhaps the essential one is applying for loans for small business start-ups.
Availing the financial products is not a small decision to make. You should be fully prepared and pursue the application procedure sincerely.
In this blog, we will share 5 essential things that you should be ready with while submitting the business loan application.
5 Essential pointers to work upon for Loans for Small Business
Before moving towards the essential ingredients, we want to inform you that different lenders have different criteria.
Traditional lending institutions have basic application procedures where a lot of paperwork is needed. The approval comes after thorough verification of details.
On the other hand, online lenders are practising a more modern approach. They seek only digital applications with minimum paperwork to follow. The approval might come early or perhaps on the same day.
Nevertheless, you can decide which form of lending norms to agree upon. Still, the essential criteria of the small business loan application will be relatively similar.
Here are the primary conditions for completing the application.
Your personal credit record does matter to your business loan chances. The lenders are interested to know your personal background and statement before assigning anything.
Such a requirement becomes essential if you are in partnership, guarantor and proprietor of a small business.
Lenders need this information to make sure your financial history does not have too many flaws. Providing the loan is a lot depends upon your creditworthiness.
You should not have too many past mistakes in handling your finances. Lenders will consider them before approving the loans.
While applying for the loans, you have to point out the whole thing in the application form. Do not put the wrong details, as it will affect your loan chances.
Licence for the Business
Before submitting the loan application, you should apply for the business licence as the topmost priority. The lender considers your loan application legitimate if you show the business licence to it.
Different countries have varied criteria for a business licence or registration. Still, a few common ones are:-
- Private Limited Companies
- Limited Liability Partnership
- Sole Proprietorship
- C-Corporation or S-Corporation
Getting a business license is an integral part of the small business loan procedure. You have to be specific in every detail, like type of business, location, or residential place, to be registered for your business.
While applying for loans for small business start-ups, you should make extra efforts to strengthen your application.
One of the tricks is to show the business statements. It should be comprised of your venture’s business plan, expenses and annual earnings. Lenders are always happy to fund those businesses that are growing their revenues. This is because the loan providers can feel relaxed with the proper loan repayments from the borrowers.
While making the business financial statement, do not overdesign it to look attractive. Lenders do not consider this. Instead, they are more interested in receiving the formal financial statement. It should be simple and straightforward.
Your statement should include assets and liabilities that are related to your business.
If you are approaching private lenders or online lenders in Ireland, you can share business e-statements to get everything instantly.
Previous Loan Applications
Lenders want to see your borrowing history before moving ahead with the loan application.
Before assigning any loan, your loan company examines whether you have made your previous payments on time or not. Besides, how many times you have applied for loans?
The same happens to personal loan applications, but it becomes more critical while seeking small business loans.
Lenders are also interested to know how many times you have been approved for a loan. If not, then what are the reasons for it to happen? They do so to analyse whether you are an eligible candidate to avail of a business loan deal or not.
Any Debts to Clear
As mentioned earlier, your previous record does matter a lot, and this point is taking it further. The lending institutions feel it is mandatory to know whether you have previous debts to clear or not.
If all the debts are clear, then they have no objection to assigning a new loan. If no, they first suggest borrowers either clear their debts or apply for business debt consolidation loans. The latter option helps merge all debts into a single loan, and you get the benefit of one interest rate.
The lenders ponder upon the possibility of how they will manage one more debt when they are already in an extensive debt trap. Therefore, it will be better from your end to clear all the pending debts first and then look for a small business loan.
In the Nutshell
This is the most basic checklist of loans for small business start-ups. Of course, there may be more depending upon the diverse policies of different lenders.
The main crux of this explanation is that you should be well prepared before becoming a candidate for a small business loan. If you approach the traditional lenders, you may have to go through strict norms. It is mainly in the context of your past financial record and credit score.
If you are thinking of approaching one of the private lenders in Ireland, you might feel relaxed. It is because you have the liberty in terms of presenting many documents. Besides, you get relaxation with the soft credit check policy of these lenders.
In the end, our primary focus is on familiarising you with the essential checklist of small business loans. You want to raise your business, which may not be achievable without lending support. You must trust the market and choose the right deal with proper preparation.