Tips for getting a small business loan

While you ponder many questions as a small business owner, one might be “Can I get a small business loan?” Maybe you need additional access to capital to create a new product or service, taking care of unexpected expenses, or maybe you need a boost to get your business going.

Nonetheless, if you’re considering getting a small business loan this year, there are many factors to consider. Whether you’re just getting started or have been in business for years, your success with externally financing your small business hinges on multiple variables. Read on as we guide you through them.

First, how do small business loans work?

Small business loans are a type of financing offered by various lenders. There are many different types of small business loans, and each have different processes and requirements. Therefore, you need to be well-informed about the loan options with different loan terms and loan amounts available for your small business.

Generally speaking, you identify a small business loan that works for your business. Then, you fill out a loan application in person or virtually. The lender will approve or deny your loan request. Once you’ve chosen and closed on the loan, the loan funds will be made available to you. Then you will repay the loan based on the terms between you and the lender.

How to get a small business loan

While the steps vary by small business loan type, there are a few standard protocols that remain consistent across most loan types. Here are some general tips on how to get a small business loan:

1.    Gather important financial documents:

The first step to getting a small business loan is to establish a financial baseline for lenders to review. Make sure your books are in good order to ensure you have a true financial picture of your business when applying for a loan. Documents like balance sheets (which shows your assets, liabilities, and business equity), profit and loss statements (which shows revenue and expenses), and cash statements (which shows your business’ cash flow) all reveal important small business financial insights that lenders might be interested in seeing.

Did you know you can receive an annualized P&L statement as part of your tax prep with Block Advisors? So, what is a P&L statement and how does it relate to your small business? Learn more about Block Advisors small business tax services.

2.    Work on your personal and business credit scores:

If you’re wondering how to increase your chances of getting a business loan, you should know how your credit score helps the cause. As a business owner your credit history plays an important factor in proving your credit trustworthiness to lenders. Your credit score is the ultimate metric to reveal your ability to repay debts. Small business loan lenders often will check your business credit score, and sometimes even your personal credit score. The higher your credit score, the easier it will be to get approved for a small business loan.

3.    Perfect your business plan:

Before submitting your next loan application, take a look at your business plan with an eye toward punching it up. Here are a few suggestions:

  • Consider the content. Every business plan tells a story and how well your story is told plays a major role in your plan’s efficacy. With that said, your plan story should be concise and compelling.
  • Update financial information. Make sure that your financial data, charts, and projections are current and reflect the true state of your company. A bookkeeping services professional should be a part of the preparation of your historical financials. Lenders see past performance and growth as key information.
  • Review your market analysis information. The more accurately you identify who your customers are, the better your plan looks. Lenders are skeptical of broad demographic targets. The better you demonstrate that you understand your customer base, the more effective your plan will be. Also, demonstrate thorough knowledge of the competition and explain how you can successfully compete.
  • Focus on why you expect to succeed. For existing businesses, describe your growth and the reasons for that growth, including positive reviews and marketing successes. If your business is new, focus on your past achievements in other ventures. Avoid exaggeration but show your small business in the best possible light.
  • Consider your approach to marketing. Explain your strategy clearly and demonstrate how you have attracted or plan to attract customers.

4.    Find the right source:

If you’re asking yourself, “where can I get a small business loan?” There are several different places you can go to for a small business loan, including:

  • Bank lenders backed by the Small Business Administration (SBA)
  • Commercial banks
  • Community banks
  • Credit cards
  • Direct online lenders
  • Equipment loans
  • Federal government loans
  • Peer-to-peer lending websites
  • Small business line of credit
  • Small business term loans
  • Working capital loans

Each source is a bit different in nature – each with different requirements and repayment terms. It’s important to read up on each small business loan type, and fully understand each source’s strengths, drawbacks, and details.

How to qualify for a small business loan

How hard is it to get a small business loan? In any market conditions, getting access to capital can be a challenge. If you’re wondering how to qualify for a small business loan, know you can improve the likelihood of your success is to show lenders a business plan that demonstrates clearly that your company is viable, solid proof of your small business’ financial standing, and a good personal and business credit score.

Getting approved for a small business loan becomes easier the more established your business is, as well as your financial track record. Some bank loans require you to be in business for at least two years to qualify, while other loans require a minimum annual revenue of $50,000 or more. Your potential lenders can review requirements so you can understand whether you qualify.

Where to go for small business tax, bookkeeping, and payroll guidance

While we’re not financial lenders, Block Advisors can help you with many small business services. In fact, you can leave taxes, bookkeeping, and payroll to us so you can focus on what you’re truly passionate about. In fact, we have the small business services you need – all year long – so you can get back to what you love about your business.

Book a free consultation with our business services group to see how we can help.


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