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Highlighting how it’s increasingly difficult for business owners to obtain credit to grow their businesses, Forbes Advisor offers 5 steps for you to better understand these processes and avoid being turned down.
A Forbes Advisor spokesperson noted:
Diving straight into a small business loan application without taking steps to prepare can be overwhelming and lead to difficulties acquiring the desired loan.
Carefully review these instructions so that your financial requests are taken into account.
The publication highlights the possibility of accessing different types of loans for small businesses according to the particular needs they present, offering as an example loans to buy new equipment in the event that businesses seek to update part of their infrastructure.
Likewise, Forbes explains how a working capital loan or microloan can help companies cover business operating expenses, such as payroll.
In this case, the most important thing is to stop and consider what the true priority is before requesting the resources.
To access a loan, different factors are taken into account:
- Initially the financial institutions will analyze the personal and commercial credit score
- A higher score increases the chances of approval and determines the interest rate
- Offer lenders a personal guarantee that they can seize if payments are missed
Credit firms also study the history of each business to analyze the possibilities of assigning them a loan, where normally banks will request at least two years of operation, while online lenders accept businesses with only 6 months in operation.
On the other hand, you must also take into account the annual income of the company, where generally banks establish figures between $100,000 and $250,000 to apply.
Entrepreneurs currently have more options to access credit than before, so it is important to carefully review which financial firm and what type of loan offers the best conditions.
Thanks to the constant technological and digital evolution, at this time small entrepreneurs can find online credit options that offer their help without as many requirements as traditional entities.
Forbes also features the option of microlenders, who can offer microloans of up to $50,000, which is ideal for those who don’t qualify for traditional business loans, as the requirements tend to be more flexible.
The publication shares the documents that are required to apply for a loan:
- Have a business plan
- A minimum of 12 months of personal and business bank statements
- Personal and business tax returns for at least two years
- Any details about current and past business loans
Additionally, entrepreneurs must submit copies of applicable business licenses and legal documents, articles of incorporation, profit and loss statements, financial statements, and a lease for the property they occupy.
If you already have all the required documents and have researched which credit option is best for you, now is the time to submit a loan application, either online or in person.
Keeping in mind that you must always provide accurate and up-to-date information, the lender will request your full name, business name, and Social Security number, as well as the desired loan amount and purpose, business tax ID, and annual income.
“Following these simple steps, such as thoroughly researching lenders and checking your credit profile, could be all that you need to ensure that you don’t pay more for your loan than necessary as well as avoiding a lengthy process,” added the spokesperson.
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