"Give Me Some Credit!"
Business loans: Formerly the realm of credit cards, crossed fingers and bank collapses, thankfully it's once again possible to get credit from lenders other than ones called "MasterCard" or "My neighbor Bill who's been pretty good about saving his change in an old cookie jar shaped like his favorite childhood clown." The recession is winding down, banks are opening up, and businesses are growing again. Maybe now is the time to get a little extra capital to fund your own plans for expansion.
If you're not experienced getting them, however, securing a loan for your business can be a little daunting. Where do I go? Who do I ask? How can I make sure they say "yes"?
Ty Kiisel, director of content marketing for Lendio, a small business lending service, answers all those questions and more.
Print+Promo (P+P): What are three good things small-business owners should do to improve their chances of getting a loan, and why?
Ty Kiisel (TK): This is an easier question to ask than to answer, but I'll give it a shot:
1. Start by looking inward.
Most lenders (particularly banks) are going to look at your credit rating, your annual revenues, and any collateral you might have. Particularly for small-business owners, your personal credit rating, along with your business rating, are important. If that's what they're going to be looking at, it's what you should be looking at too. Although there are lenders who look at other criteria, you're credit score is No. 1. The lower your score, the more expensive (read: the higher the interest rate) the loan will be.
2. What am I going to use the extra money for?
Banks are pretty risk averse and don't like lending to small-business owners who can't demonstrate they have a plan and a projected outcome regarding how the funds will be used and how they will positively impact the business. A plan is more likely to get the small-business loan than no plan. So I guess the question should really be, "Am I able to effectively share the plan with a lender so they get as jazzed about what I'm going to do with the money as I am?"