Since the Global Financial Crisis, it has been incredibly tough for small-business owners to gain access to loan funds from a bank or alternative lender that offers decent rates. While in recent years things have improved somewhat, especially with online lenders, it’s still incredibly tough if you want to get access to cash from a bank.
In fact, according to a new study from Dun & Bradstreet and Pepperdine University’s Graziadio School of Business and Management, over the last three months only 38 percent of study respondents (all of them small businesses) qualified for a bank loan, in comparison to 70 percent of mid-size ventures. Furthermore, the numbers of loans available from the Small Business Administration is even lower. The study showed that just 1 percent of the surveyed small businesses qualified for an SBA loan over the same three-month period.
If you really need to gain access to some extra cash for your small business soon, it’s important to remember that even the tiniest details can matter. If you’re keen to learn more, read on for some tips you can follow today to make it easier to access funds from a lender in a timely manner this year.
Keep Finances Up-to-Date and in Order
One of the first things you need to concentrate on if you want to secure a loan is having your accounts up to date and in order. Lending institutions, no matter whether a huge bank or a boutique provider, will always want to get access to your financial records to see details of your venture’s current accounts, tax implications, and projections for the future. They will often want to see your personal records as well, particularly if you operate a startup that doesn’t have much in the way of trading records as yet.
Lenders want to be sure that a business they loan to is a good financial risk and that they won’t have trouble getting their funds paid back, on time and with interest. Updated financial records will be one of the first things they typically ask for to show this, as well as tax returns from the past five years, if available.
One way to make it quick and easy to provide this kind of financial data to lenders is to create and maintain a financial dashboard for your business accounts. That way, you’ll be able to see all the pertinent information for the venture at a glance, and you won’t have to spend so much time collating everything for a loan application.
Have Comprehensive Data Available for Lenders
There is a variety of other data that some lenders will want access to these days as well. For example, online lending firm Kabbage, which provides loans to small businesses, many of whom would typically not be able to get a loan from traditional banks, uses an automated platform to analyze information from numerous sources.
The company’s system checks out diverse data points, including checking accounts, shipping details, e-commerce platforms, and social media accounts to get a more complete view of a venture’s financial credibility. Similarly, another fintech lender, InVenture, has decided not to use a single credit score to evaluate applications, but rather gathers thousands of data points for each user.
Research Lenders Before You Make an Application
When you see how different lenders can be in their methods, it highlights the importance of doing your research on the various options available before you actually apply for a loan. Keep in mind that there is no need to approach the institution that is just down the road from you, or the bank you currently have your accounts with. Instead, it always pays to research a variety of potential lending organizations to see which ones might match your situation best and thereby give you the highest chance of having your application approved.
Different companies have different rules and requirements when it comes to loans, so some will not even think about granting your request for funds, while others might approve it in mere minutes or hours.
Apart from banks and boutique online lenders, there are also some niche lending alternatives you can consider. Check out crowdfunding options (like Indiegogo and Kickstarter), as well as lending programs which specialize in specific industries only.
Write a Detailed Business Plan
Lastly, if you want to get a business loan in a hurry or without hassle, you should ensure that you have a current business plan available to provide lenders if they ask for it. These documents show lending institutions that you have a road map put in place for the future.
An up-to-date business plan will help organizations to see that you have done your research on your target market and competitors; that you are clear about your mission and business goals; that you have seriously calculated estimated sales or profit projections; and that you have considered your venture’s strengths, weaknesses, opportunities, and threats.
A comprehensive business plan will also include data on the amount of funding you require, your plans for its use, and the monetary benefit you calculate will result from the injection of cash.
