Getting small business loans has certainly become more difficult in recent years. Banks are wary of lending to smaller companies because these were the companies hardest hit by the economic recession. Also, they tend to default more than larger businesses. This problem is even worse with start-ups and professional service companies, such as doctors and lawyers. Today, we’re going to outline some steps you can go through to make sure you get funding.
First, you’ll want to repair your credit as much as possible. Even having a few negative items on your report can greatly decrease the odds that you will get funding. Banks are doing more than just looking at the score. They will look over the report to see not only if you missed payments, but also what the payments were. Try to have these negative items removed, if at all possible. Call your creditors to see if you can have them removed.
Once you’ve done that, you’ll want to work on two ratios. Your personal debt-to-income ratio should be as low as possible. That means you shouldn’t take on any new major obligations before seeking funding. If you already have a running business, you’ll also want your expense-to-revenue ratio to be as low as possible. This factor will determine the interest rate you get, to some extent. More importantly, this drives the amount you will be authorized.
Finally, you’ll want to get all of your financial documents together. This includes your profit and loss statements, revenue statements, etc. You may even need to have proof of income verification to get certain small business loans. Therefore, be ready for that, as well.