Small Business Lending

April 7, 2020 by Susan Paige

For a new and developing small business, borrowing capital to launch or grow your operations can seem like a daunting undertaking. When you take out a small business loan, in effect, you’re making a big bet on your business’ successful operations. Also, the application process can appear very complex, and nobody feels particularly comfortable being held up to scrutiny. Moreover, the terms of a loan may seem somewhat intricate or confusing to someone who isn’t familiar with borrowing. However, the way that you can go about preparing to apply for a small business loan can help to remove a lot of the stress from the process and empower you to make informed decisions.

Build Your Business’ Credit

Building your business’ credit score will improve the strength of your small business loan application considerably. In order to slowly build your score over time, you need to draw out a few different lines of credit like a credit company card. You need to make payments consistently, and not just the minimum payments. Don’t suddenly increase your credit card usage, as that can take a lot of points off your credit score. Moreover, you want to avoid carrying over a large volume from month to month to avoid paying unnecessary interest fees.

While it’s helpful to have more than one line of credit, an excessive number of open credit lines can lower your business’ credit score. This is especially true when all of your credit lines have high outstanding balances within the same time period. Simply applying for a lot of credit lines can also have a negative impact on your credit score. Frequent credit checks by third-party companies, referred to as hard inquiries, can be weighed against your overall credit score. To stay on top of your small business’ credit, use a resource that gives you access to all three credit reporting bureau and monitor all activity reflected in your report. If something doesn’t look right to you on your credit report, get help correcting the problem right away; don’t wait to deal with a problem until it’s a problem on an application.

Work with a Well-Established Lender

Sometimes smaller rates can be more receptive to applications and even offer better rates than larger banks will. While it may be preferable to deal with a smaller outfit than a monolith, it’s also important to work with a bank that is well established and has a longstanding service tradition. GBTI has been serving its customers for over 180 years, markedly higher than many banking institutions. Realistically, you’d like to choose a lender who offers benchmark reliability and whose performance history has helped shape industry standards in the regions that they serve.

One of the most important aspects of working with a well-established lender is having access to help and resources when you need it. Ideally, you’d like to form a relationship with a lending bank that has expertise in helping a variety of businesses but is familiar with the unique needs of small businesses. A good lending institution provides you with a connection to an individual who will patient enough to answer the tough questions and also ask you some hard questions that you may not have thought about. Personal attention can help you gain valuable insight into your business’ loan terms and can help you to consider a better approach to borrowing.

Present a Strong Business Plan

A small business loan application should include a detailed business plan to inspire lenders with confidence that their capital will give your business the means to succeed. Your plan should be thoroughly researched and contain background information about your industry as well as market analysis and growth projections. You should describe your products or services and your daily operation in detail; don’t take for granted that your audience will know about the inner-workings of your industry. Try to explain key concepts in very basic terms. Include itemized financial information about your expenses and revenue thus far. It’s critical that you have hard data and financial statements to back up the information contained in your plan. Anyone who is reviewing your application can potentially ask for you to provide supporting material, and you need to be able to produce it readily.

Your business plan should also describe your marketing and outreach efforts. Talk about the different strategies and platforms that you will use to market your business such as social media, a business website, an email marketing campaign, or paper advertisements. It may be helpful to discuss why your business’ physical location or service area will tap into an unmet or growing consumer demand. Be sure to include data about how much of your business’ budget is allocated to marketing activities. Ultimately, lenders want to see that a small business has devised a strategic approach to rise above its competitors and achieve sustained growth and development.

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