The loan helps businesses grow. It is a known and an established truth. However getting loan amount in your hand is a very tedious process. Even though there is multitude of traditional banks and alternative lenders available these days, finding a cheaper interest rate and a hassle-free and less paperwork process is very tough. The whole process might look complicated but for small businesses, a quicker loan acquisition can be done if below five key points are known beforehand.
#1 Know your loan options
Before you even start filing the applications you must know what the best options available to you are. As a small business owner your loan amount may not be exceedingly high and with less principal amount you may think to be soft on the rates of interest sometimes. What is the urgency of money and how easy and hassle free you can get it from various lenders? Time is of the essence and waiting too long for loan acquisition might not be a cool idea to your head. Hence the first step would be to find out the exact amount of money you would need and then make a list of probable lenders. Also, make sure to check what type of loan you are getting. Is it a secured or an unsecured loan, whether rates of too high of manageable, how swift is the recovery process and most importantly how legal and lawfully you are able to get the money.
#2 Keep a decent Credit score
In this electronic age, we leave a footprint for every action we take. Any past EMIs, loans, repayments and earning and spending habit are tracked. You must already be aware of the credit score banks are so much interested into. This ensures lender can have faith on your financial condition. Your debt to income ration should not be more too. Always pay your bills on time and if for some reasons your credit scores are very poor you should never hide it and mention the reason while application process. Similarly, when you are choosing a non-traditional lender you should first establish a good relation and trust with your lenders.
#3 Prepare a compelling Business plan
Whether it’s a bank loan or a non-bank loan, the lender will definitely check your business plan before giving you any amount of money. Any firm or lender giving fast business loans would like to be convinced that your business plan will work for sure. Your business plan should have a clear roadmap on how you wish to achieve profits and how you will be utilizing your funds. Apart from your business plan, you should also be ready with all your past accolades and experiences if any. This will help you win the confidence of your lender.
#4 Keep your accounts in order
Always keep all your accounts and financial documents in order with the help of a good accountant. File your income taxes on time. Keep your financial statements and business reports ready. These may be re-scrutinized by a third party or by some CA of lender’s choice. At times creditors prefer to have your reports and finances audited by a trusted source. If you can afford a small amount there it would be a positive thing to do. However, it’s not mandatory and it depends on how much readiness you would like to keep.
#5 Wait but be ready with any further documents and references needed
Typically you would like to expect a reply in few days or a fortnight but the lender can come again asking for more documentation and proof to validate your statements. Sometimes they can ask you to give details about few references knowing and doing business with you. Be ready to furnish your personal details too along with your business. After all, you represent your business. If you have a business partner then banks can also ask for insurances for all of the partners if anything were to happen to them.
In the end, you may end up keeping more documents ready than needed but it would eventually lead to a quicker loan acquisition process. A small amount of money you invest in keeping yourself prepared can save you a lot of time and effort.