Thinking of applying for a small business loan? At first, the process might seem daunting. The more prepared you are for the application process, however, the more likely you are to have your loan approved. Here are 10 key steps to securing your small business loan.
1. Understand the types of small business loans
Just as your small business has unique financial needs, so too do small business loans vary in size and purpose. If you need help with cash flow or start-up capital to get your business off the ground, you may be interested in a guaranteed loan.
If you need money for inventory, property purchase, equipment, or access to ongoing credit, you may want to explore flexible options through business financing.
2. Research lenders
A lender can be a person, a business or part of the government. Each will offer unique levels of service, risk and interest rates. Be sure to research the lender that will best suit your business.
At Meridian, we offer great rates on a wide range of small business loans, designed to help you bridge a gap or take advantage of growth opportunities.
3. Keep your credit score in mind
When you approach a lender for a small business loan, remember that they will use your credit and business history to help evaluate your application. The more a lender trusts that you will be able to pay the money back, the more likely they are to approve your small business loan. As a primary measuring tool, lenders will look at your credit score.
4. Update your financial statements
As you plan to meet with a lender to secure a small business loan, it’s important to be prepared with the documents they may want to see. Make sure your financial statements are up to date, including your balance sheet, income statement, and a cash flow statement.
5. Gather additional documents
To help support your small business loan application, it may help to have additional documents on hand, as well. Consider having your most recent income tax return on hand, recent bank statements, as well as proof of your business registration.
6. Get clear on plans for your loan
Lenders want to know that you are clear about your plans for a small business loan. Before you submit an application, make sure you have a specific dollar figure in mind, with a clear plan for how it will be used and the benefit it will bring to your business.
7. Identify potential collateral
A lender may ask for collateral – a guarantee that they will be repaid, should you fall behind on loan payments. Gather supporting documents ahead of time for collateral like real estate, business equipment, investments, inventory, or other assets that could be sold for cash.
8. Be open to financing options
When you meet with a lender to discuss a small business loan, ask about options for short, medium and long-term financing. Depending on your business need and structure, your cash flow, and your timeline, you may qualify for non-traditional small business loans like asset-based financing or commercial owner-occupied lending.
9. Analyze proposed business loans
Once you have been offered a small business loan, it is important to review its key terms, including the loan amount, the interest rate charged, and details of the repayment schedule. If you are unsure about being able to afford the scheduled payments, ask if variations can be offered, like a grace period or reduced monthly payments.
10. Learn more about small business lending
Securing a small business loan doesn’t need to be daunting. If your business could use the financial boost of a loan, it helps to learn as much as you can about the lending industry. When you understand the nature of small business loans, you will be better prepared to compare lenders and find the best solution for your business.
A trusted partner for small business
At Meridian, we’re proud of the ways we help small businesses thrive in our community. Whether you need start-up funding or an injection of cash to help you grow, be sure to ask about the Canada Small Business Financing Program, through which you can qualify for a guaranteed loan from Meridian.
We also offer a wide range of flexible, industry-specific, and alternative financing solutions for small business.
If you’re considering a loan for your small business, talk to a Meridian Business Advisor.
