small business loan

Before, During, After: Mastering Your Small Business Loan Application

By Robert Porter

As essential as working capital is, the process of obtaining it can be daunting. Not every small business owner is confident in the right moves to make, and many are worried about unforeseen bumps in the road. Read on to discover the tips and tricks to mastering your small business loan, guaranteed to put a spring in each lending step.

Before You Apply: Find the Right Fit

Quick and easy isn’t always best. While it may be tempting to get cash fast, it’s important to understand the cost of speedy capital. Often, merchant cash advances or online lending pair convenience with outrageous percentages. Resist the urge to go with the first lender that says yes and pause first to do your research. Talk to your local bank and alternative lenders to understand all of the options that may be available to you.

But what if I have too many options? After your research you may find that you have multiple lending options; finding the right one for you is the next step. It’s important to ask yourself: what else do I want to get out of this loan? For some people the answer will be an improved credit score, while others may be looking to cultivate a long term relationship with a lender, and others may want the option of early payback without penalty.

Understanding what else you want to get out of your loan will help you narrow down your options. Ask potential lenders if they would be willing to connect you with a past borrower so that you can gain firsthand insight, or check customer reviews of specific lenders. Consider finding a mentor who will help guide this process for you. While its common knowledge that getting an advisor to help you effectivity deploy capital is a good idea, too few small business owners access expert advice during the decision process. Don’t let this be you. Find out what mentoring services are available to you, and seek out an unbiased advisor who can support you in your decision making.

During the Process: Stay Transparent and on Your Toes

Be upfront about your blemishes. It’s not worth the time or energy to try to gloss over financial blemishes. The truth will always surface, and being upfront and honest with your potential lender will save you from delays in the process. Share the realities of your business’ financials and pair them with explanations as to why. Every lender out there wants to work with you, but you’ve got to meet them halfway.

Be proactive with your admissions, too. Even if you feel secure in your financials, it’s likely that your eye isn’t as critical as a potential lender’s. Being willing to point out areas that you think might cause a hiccup will do more than build your lender relationship, it can actually help you get your loan approved. For example, you may have let an employee go last year, which set you back, leaving you with less than stellar year-end outputs. Explaining this to your potential lender might cause him/her to look less at last year, and instead, look closer at the past two or three years to compensate.

Organization is key. No matter what lending route you take, you will need to submit an array of documents for review. Ideally you’ll send your complete packet in at once, rather than trickle single documents onto your potential lender one by one. This is because in most cases, until your required document package is complete, you’ll be sitting on a lender’s shelf. Figure out what you need to send right away, and then work diligently on getting everything else collected and submitted in as timely a fashion as possible.

After Funding: Stick With It

Commit to your plan. Be sure to stick with your deployment plan once the funds are in your hand. Too often a small business owner will get derailed and use the money towards something else (i.e. an unplanned emergency). Changing your deployment plans could affect your ability to pay back your loan, which is why it’s so important to set clear goals and stick with them.

Check in. Make an effort to check in with your lender about every six months, let him/her know how things are going for your business, and don’t be shy about soliciting mentorship and referrals for additional business support. You never know when another capital need might pop up, and keeping a touch point on lender relationships will only help pave the path for your next lending journey.

With the right attitude and help along the way, you can make the most of the lending process. Focus, prepare, and come to ready to play in order to secure the capital that your business needs to succeed.

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Robert Porter
Bob Porter is the Director of Lending and Business Advising at Pacific Community Ventures, a nonprofit organization that pairs affordable debt capital with free business advising to help small businesses grow and communities prosper.

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