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The process of applying for a business loan can be long, requiring a fair amount of documentation, thorough underwriting procedures and credit checks. It can take even longer if there are discrepancies or if borrowers are underprepared. According to Finder’s Consumer Confidence Index, about 36% of American business owners are considering getting a business loan. For those starting the business loan journey, we’ll uncover three simple tips that can take your application for a business loan from mess and stress to ease and efficiency.
Consider a no- or low-document business loan
At the top of this list is a way to simply skip the extensive documentation you’ll need to provide upfront all together. Compiling a barrage of financial statements and more can be overwhelming for small business owners with limited time or resources, especially if you need funding in a time crunch.
This is where low or no-doc business loans come into play. These types of lenders specialize in streamlining the business loan application process, making it easier to secure financing without the usual paperwork hassles. Low-doc loans are typically offered by online lenders and loan marketplaces that connect to your financial accounts. This way you spend less time collecting and organizing documents, and more time comparing loans.
Not only will you simplify your application process, you could get a decision in minutes or hours compared to the days or weeks it may take a bank to approve your loan, and funding can hit your account in as little as 24 hours after approval.
For traditional lenders, gather all documents ahead of time
If traditional lenders, like banks or credit unions are more your speed, you can simplify your business loan application by gathering all the necessary paperwork before starting the application process.
Create a checklist to gather the following information
- Three years worth of business and personal tax returns
- Balance sheets, profit and loss statements, cash-flow statements, business debts
- Detailed business plan including financial projections and how you plan to use your business loan
- Obtain your personal and business credit report and review for any inaccuracies
- Ensure all licenses, registrations, contracts and legal documents are up to date
- Gather at least three to six months of business bank statements
Having all the required documents readily available not only streamlines the application, but reduces the need for back-and-forth communication with the lender to provide missing information. With the complete set of documents, underwriting can more quickly evaluate your eligibility and conduct the approval process.
Know exactly how much funding you need, qualify for and can afford
There are countless types of business loans, each with varying terms and loan amounts. Navigating your options comes down to how much funding you need, if you meet business loan eligibility requirements and how you plan to use the business loan.
Start by asking yourself these questions:
- How much capital does my business require? Get specific. Create cost projections for the use of funds and estimate the revenue that you can make by taking out the loan.
- What will I use my funds for? Whether its expansion, equipment purchase or working capital, understanding the full use of the funds you intend to borrow can help you determine which type of loan you may need to go after.
- What is my credit score, time in business, etc? Go over your qualifications at the start, so you know which types of business loans you may be eligible for before you start shopping.
- What is my repayment strategy? Consider your cash flow and sales projections as you estimate what type of repayment schedule would fit your needs best.
Once you’ve determined how much you need, one of the easiest ways to find out what type of business loan and terms you qualify for is by using a business loan marketplace to shop for loans and prequalify. This way, you can fill out one application and are shown all business loans, terms and loan amounts you qualify for in one swoop. A business loan marketplace helps you narrow down your options and choose a lender that specializes in the type of loan you need.
Bottom line
With the right strategies in place, you can simplify what is typically a daunting process. Start by considering a low-doc loan to save you the most time and offer you the most ease. Otherwise, gather and organize the required documentation, determine your loan objectives and hit a business loan marketplace to further streamline your business loan application process.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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