Business owners need business loans in order to grow their businesses. Having quick access to those loans is vital, especially if they’re facing a pressing issue like a sudden equipment breakdown or hiring new employees. If you’re a business owner looking to apply for immediate business financing, there are ways you can fast-track your loan approval.
Check-out these tips on how you can get lenders to approve your loan faster:
1. Improve Your Credit Background
One of the challenges many small start-ups face is difficulty qualifying for loans. Typically, you need a strong and established credit profile to qualify for business financing. However, start-ups, by their very nature, are in their infancy. They haven’t been in business long enough to build this type of credit history which makes their financing options limited.
Start-ups with a less than ideal credit score (usually below 500) can still qualify for fast business loan options like business credit cards and lines of credit from online alternative lenders. From there, they can start building their credit score by paying their bills on time and avoiding loan defaults. It takes about six months of credit activity to build enough credit history and generate a FICO credit score. If you’re looking to improve your credit score from 500 to 700 or 800, that could take around 12 to 18 months. Once your score reaches a good point, loan approvals will be easier in the future.
2. Prepare the Needed Documents
There are a number of documents lenders will require when applying for a small business loan. Failing to provide even one or two of them can cause delays in your application process.
In general, these are the documents you’ll need to prepare for your loan application process:
- Tax returns (personal and business)
- Bank statements (personal and business)
- EIN certification
- Business plan
- Documents for Identification
- Business lease copy
- Balance sheets
- Business permit
Familiarize yourself with these documents and make sure you have ALL of them readily available BEFORE you begin your application. It’s also possible that the financing company will ask you for supporting paperwork like collateral, articles of association, or cash flow history and financial projections. Be sure to get these documents ready as well.
It helps to contact the financing company beforehand and ask about the typical list of documents and supporting paperwork they will ask for. This way, you won’t have to waste time going back and forth to submit any additional requirements.
3. Write a Good Business Proposal
A good business plan serves as a roadmap for how you’ll use the loans you’re applying for to grow your business. A thoughtful, well-presented plan can make the difference between loan denial and approval. By clearly outlining your strategies and goals, you’ll paint a picture for the lenders as to how you’ll bring profit into your business. This will also serve as assurance that you can fulfill your repayments if you are approved.
A well-written business proposal will help make your loan application approval quicker. Research what information is vital to include, like your company’s name, marketing strategies, how much money you’ll need and how you plan to repay the loan. Compile these into a check-list to guide you as you build out your plan.
4. Apply for a Secured Loan
Putting up collateral for your business loan can make the application process smoother and help to fast-track the approval. Providing a guarantee or collateral means the lender faces less risk and can offer you better terms and a lower interest rate for the loan.
The most common types collateral that businesses will put up are equipment, invoices and inventory. If your business hasn’t acquired these assets, you can also use a personal guarantee like real estate, retirement funds or vehicles. You should never pledge valuables you can’t afford to lose.
5. Consider Applying from Online Lenders
If you need a business loan to address pressing matters, online lenders are typically a quicker route. When you apply for bank loans, an approval will take weeks and isn’t guaranteed. Approval from online lenders only takes a day or two and you’ll have a higher chance of approval, even if you have a less than stellar credit score.
Online lenders usually have higher interest rates compared to traditional bank loans, but if you shop around, you may be able to find one that offers a low-interest option. Having a good credit background may enable you to get higher borrowing capacities, low-interest rates and longer repayment periods.
Get a Quick Decision from Lenders for a Small Business Loan Applications
Business loan approval is all about proving your ability to repay the money you owe the lenders in the allotted time frame. If you have a good credit score, a well-conceived business plan and the required documents prepared, qualification can be fast and easy. You should always do your research before completing any application, and find a great resource for all your small business loan questions and needs.
Author | Emily Forbes
An Entrepreneur, Mother & A passionate tech writer in the technology industry!