You might have heard some scary statistics about how the vast majority of small businesses go bankrupt within 5 or 10 years. But did you know that about 30% of all small businesses fail just because they run out of capital? On top of that, 43% of small businesses apply for loans each year.
The businesses that get those loans have the capital they need to keep themselves afloat. On the other hand, those who fail to qualify for loans may end up going out of business.
When it comes to how to get business loans, luck favors the prepared. So how can you make sure that you have the highest chance possible of getting the business loan that you need?
Read on to learn all about how to get the loans that you apply for!
Know How Banks Assess Businesses
There are a few things that banks tend to look at before granting loans. If you want them to approve of your application, then you should prepare to show them what they are looking for.
Some of the most important things that banks consider when assessing business loan applications are your credit score, collateral, and bank loyalty.
Prepare Your Credit Score
Most people are familiar with the importance of having a good credit score. It is useful even for people who don’t have businesses. But it takes on a special importance for small business owners.
Of course, your credit score gets built up over a lifetime. There is only so much you can do to increase it before applying for a loan. But whatever you can do, you should do.
In some cases, you can find old unpaid bills and pay them off. That can increase your credit score instantaneously. If you can wait a little while to apply for a loan, then you can try to build up your credit score as much as possible before applying.
If your collateral is good enough, it can make up for deficiencies in other areas. Even if you don’t have a huge amount of collateral, any collateral at all can help.
If you can’t raise money except by applying for a loan, maybe you can collect collateral to help you get that loan.
Build a Bank Relationship
The more connections you have with a bank, the more likely they are to approve a loan. In most cases, this means that you should apply at your usual bank. If necessary, it might be helpful to set up bank accounts at other banks as well.
Of course, there are many types of small business loans, and there is an incredible amount of competition to get startup loans. The business process tends to favor people who are more prepared than their competitors.
If you want to know more about when to get a business loan and the best practices for receiving small business loans, check out this SBA guide.
Learn How to Get Business Loans
We hope that you were able to learn something helpful from this brief article on how to get business loans. Qualifying for a loan can make all the difference between the success and failure of a small business. It is worth putting the appropriate amount of effort into making sure that you are as prepared as possible.
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