Tips for Getting Your Small Business Loan Approved 

Disclaimer:
Information
in
the
revenue-based
financing
articles
is
provided
for
general
information
only,
does
not
constitute
financial
advice,
and
does
not
necessarily
describe
Biz2Credit
commercial
financing
products.
In
fact,
information
in
the
revenue-based
financing
articles
often
covers
financial
products
that
Biz2Credit
does
not
currently
offer.

When
you
need
capital,

getting
a
loan
can
be
the
thing
that
makes
or
breaks
your
small
business.
Whether
you’re
looking
to
expand
your
operations,
purchase
new
equipment,
or
manage
cash
flow,
having
access
to
additional
capital
can
provide
the
boost
your
business
needs.
Unfortunately,
the
fact
that
you
need
money
doesn’t
mean
that
a
traditional
bank
or
financial
institution
is
going
to
loan
you
some—28%
of
business
loan
applicants
are
rejected
or
only
partially
approved.

In
order
to
receive
financing,
you
need
to
show
them
that
your
business
is
sound,
that
your
future
is
secure,
and
that
you
will
be
able
to
pay
back
the
money
they
lend
you
with
interest.
And
the
way
that
you
prove
this
to
them
is
through
a
detailed
loan
application.
In
this
article,
we’ll
walk
you
through
the
tactics
and
tips
that
can
help
you
navigate
the
loan
application
process
and
increase
your
changes
of
timely
approval.

3
Key
Takeaways

• Understand
  what
  
  lenders
  are
  looking
  for
  in
  a
  loan
  application
  to
  better
  position
  your
  business
  for
  approval.
• Prepare
  all
  necessary
  documents
  thoroughly
  and
  ensure
  your
  credit
  score
  is
  in
  good
  standing
  before
  applying.
• Tailor
  your
  application
  to
  the
  specific
  requirements
  of
  the
  loan
  type
  you
  are
  seeking
  to
  improve
  your
  chances
  of
  securing
  the
  best
  possible
  terms.

Types
of
Small
Business
Loans

There
are
several
types
of
loans
available
for
entrepreneurs
and
small
business
owners,
each
designed
to
help
with
different
areas
of
your
business.
Understanding
what
the
options
are
can
help
you
choose
the
right
financing
for
your
situation.

1. 
   Term
   Loans:
   Term
   loans
   are
   one
   of
   the
   most
   common
   types
   of
   
   small
   business
   financing.
   With
   a
   term
   loan,
   you
   receive
   a
   lump
   sum
   of
   money
   upfront
   that
   you
   then
   repay
   with
   interest
   over
   a
   fixed
   period
   of
   time,
   typically
   a
   few
   years.
   These
   loans
   are
   perfect
   for
   large,
   one-time
   investments
   like
   buying
   equipment,
   expanding
   your
   product
   line,
   or
   buying
   out
   a
   competitor.
   The
   structured
   repayment
   schedule
   allows
   for
   predictable
   budgeting,
   but
   it’s
   crucial
   to
   ensure
   that
   your
   cash
   flow
   can
   support
   the
   regular
   payments.
2. 
   SBA
   Loans:
   Small
   Business
   Administration
   (SBA)
   loans
   are
   similar
   to
   traditional
   term
   loans,
   except
   that
   they
   are
   backed
   by
   the
   U.S.
   SBA,
   reducing
   the
   risk
   of
   default
   for
   lenders.
   As
   a
   result,
   they
   have
   better
   interest
   rates
   and
   terms,
   but
   at
   the
   same
   time,
   typically
   take
   longer
   to
   be
   approved
   because
   they
   come
   with
   more
   requirements
   and
   red
   tape.
3. 
   Commercial
   Real
   Estate
   (CRE)
   Loans:
   If
   you’re
   planning
   to
   purchase
   or
   refinance
   commercial
   property,
   
   CRE
   loans
   may
   be
   the
   option
   for
   you.
   These
   loans
   allow
   you
   to
   purchase
   real
   estate
   or
   buildings
   using
   the
   financed
   property
   as
   collateral
   for
   the
   loan.
   And
   because
   the
   collateral
   is
   so
   strong,
   you
   can
   typically
   secure
   low
   interest
   rates
   and
   favorable
   terms.
   That
   being
   said,
   any
   property
   that
   you
   finance
   must
   meet
   minimum
   appraisal
   standards,
   so
   getting
   the
   loan
   approved
   may
   take
   longer
   and
   be
   more
   complex
   than
   other
   types
   of
   loans.
4. 
   Revenue-Based
   Financing:
   This
   type
   of
   financing
   is
   not
   a
   loan,
   but
   allows
   you
   to
   repay
   what
   you
   borrow
   based
   on
   a
   percentage
   of
   your
   business’s
   revenue.
   It’s
   a
   flexible
   option,
   especially
   if
   your
   income
   fluctuates,
   meaning
   that
   you’ll
   pay
   less
   when
   your
   revenue
   is
   down
   and
   more
   when
   it
   goes
   up.
   The
   downside
   is
   that
   revenue
   based
   financing
   comes
   with
   higher
   interest
   rates,
   and
   the
   total
   repayment
   amount
   can
   vary
   depending
   on
   your
   business’s
   performance.
5. 
   Business
   Lines
   of
   Credit
   (LOC):
   Also
   not
   a
   loan,
   a
   
   business
   line
   of
   credit
   is
   like
   a
   credit
   card
   without
   the
   plastic.
   You’ll
   be
   approved
   for
   a
   maximum
   amount
   of
   credit
   that
   you
   can
   then
   draw
   on
   as
   needed,
   only
   paying
   interest
   on
   what
   you
   use.
   This
   makes
   it
   a
   great
   option
   for
   managing
   cash
   flow,
   covering
   short-term
   expenses,
   or
   addressing
   unexpected
   costs.
   LOCs
   can
   be
   revolving,
   meaning
   you
   can
   continue
   to
   borrow
   as
   long
   as
   you
   don’t
   exceed
   your
   credit
   limit,
   making
   them
   a
   versatile
   tool
   for
   small
   businesses.

What
Are
Banks
Looking
for
When
Reviewing
a

Business
Loan
Application?

The
key
factors
banks
are
looking
for
in
your
application
are
referred
to
as
the
“5
C’s
of
credit”
and
include
character,
capacity,
capital,
collateral,
and
conditions.

1. 
   Character:
   Lenders
   want
   to
   see
   that
   you
   are
   a
   responsible
   borrower,
   so
   will
   check
   your
   credit
   history,
   looking
   to
   see
   if
   you
   have
   a
   history
   of
   making
   debt
   payments
   on
   time.
   If
   you’re
   a
   startup
   or
   new
   business
   owner,
   having
   a
   good
   personal
   credit
   score
   can
   also
   help.
2. 
   Capacity:
   Capacity
   measures
   your
   ability
   to
   repay
   the
   loan.
   Lenders
   will
   closely
   examine
   your
   business’s
   cash
   flow,
   revenue,
   and
   existing
   debt
   obligations
   to
   determine
   if
   you
   have
   sufficient
   income
   to
   cover
   the
   loan
   payments.
   If
   your
   business
   has
   been
   showing
   consistent
   cash
   flow
   for
   years
   and
   you
   can
   demonstrate
   solid
   financial
   performance,
   it
   will
   help
   you
   convince
   lenders
   that
   you
   are
   able
   to
   take
   on
   additional
   debt.
3. 
   Capital:
   Capital
   refers
   to
   the
   amount
   of
   money
   you’ve
   personally
   invested
   in
   your
   business.
   If
   you’ve
   self-financed
   your
   business,
   it
   shows
   investors
   that
   you’re
   highly
   committed
   to
   its
   success
   and
   that
   you’re
   confident
   in
   the
   direction
   it’s
   headed.
   Lenders
   like
   to
   see
   this,
   and
   will
   be
   more
   willing
   to
   offer
   you
   financing
   because
   you
   have
   skin
   in
   the
   game.
4. 
   Collateral:
   Collateral
   refers
   to
   assets
   that
   you
   pledge
   as
   security
   for
   the
   loan,
   including
   business
   assets,
   real
   estate,
   equipment,
   or
   inventory.
   Collateral
   reduces
   the
   lender’s
   risk
   because
   it
   provides
   a
   way
   to
   recover
   their
   money
   if
   you
   default
   on
   the
   loan.
   If
   you
   don’t
   have
   a
   very
   strong
   application,
   offering
   up
   more
   collateral
   may
   be
   enough
   to
   get
   the
   lender
   to
   still
   offer
   you
   financing.
5. 
   Conditions:
   Conditions
   include
   the
   overall
   economic
   environment,
   industry
   trends,
   and
   how
   you
   plan
   to
   use
   the
   loan.
   Lenders
   will
   consider
   how
   external
   factors
   might
   impact
   your
   business’s
   ability
   to
   repay
   the
   loan,
   and
   they
   will
   want
   to
   know
   how
   the
   loan
   will
   help
   you
   improve
   your
   business
   over
   the
   coming
   months
   and
   years,
   as
   this
   will
   be
   key
   to
   your
   ability
   to
   repay
   them.

How
Can
You
Prepare
for
a
Business
Loan
Application?

1. 
   Educate
   Yourself:
   You’ll
   want
   to
   know
   everything
   you
   can
   about
   the
   different
   types
   of
   loan
   that
   are
   available
   and
   the
   various
   requirements
   that
   each
   has,
   since
   not
   all
   loans
   are
   suitable
   for
   every
   situation.
   Do
   a
   deep
   dive
   on
   the
   loan
   options
   already
   mentioned
   to
   find
   the
   one
   that
   best
   fits
   your
   business
   needs.
   For
   instance,
   if
   you’re
   looking
   for
   a
   loan
   with
   predictable
   payments,
   a
   term
   loan
   might
   be
   the
   best
   option,
   but
   if
   you
   need
   flexible
   cash
   that
   you
   can
   draw
   on
   as
   needed,
   a
   business
   line
   of
   credit
   might
   be
   the
   thing
   for
   you.
2. 
   Decide
   How
   Much
   You
   Actually
   Need:
   Business
   financing
   isn’t
   free
   money–you’ll
   have
   to
   pay
   back
   the
   loan
   amount
   that
   you
   receive,
   plus
   interest.
   So
   make
   sure
   you
   don’t
   take
   out
   more
   than
   you
   need;
   there
   needs
   to
   be
   a
   clear
   path
   to
   ROI.
   At
   the
   same
   time,
   you
   don’t
   want
   to
   borrow
   too
   little.
   If
   your
   financing
   doesn’t
   actually
   cover
   your
   business
   need,
   you’ll
   be
   digging
   yourself
   into
   a
   hole
   with
   no
   way
   out.
   Carefully
   evaluate
   your
   business
   goals,
   calculate
   the
   amount
   of
   financing
   you
   need
   to
   achieve
   them,
   and
   check
   that
   your
   projected
   cash
   flow
   can
   support
   the
   repayment
   terms.
3. 
   Improve
   Your
   Credit:
   Your
   credit
   history
   plays
   a
   big
   part
   in
   being
   approved
   for
   a
   loan.
   If
   you
   don’t
   have
   great
   credit,
   start
   working
   on
   improving
   it
   as
   soon
   as
   you
   can,
   as
   it
   can
   be
   a
   drawn
   out
   process.
   If
   you
   need
   to
   build
   stronger
   credit,
   work
   on
   paying
   off
   existing
   debt,
   making
   loan
   and
   credit
   payments
   on
   time,
   and
   be
   sure
   to
   avoid
   opening
   any
   new
   accounts
   before
   submitting
   your
   loan
   application.
   If
   you’re
   a
   fairly
   new
   business,
   a
   good
   personal
   credit
   score
   may
   help
   you
   secure
   a
   loan
   in
   lieu
   of
   business
   credit
   history.
4. 
   Prepare
   Key
   Financial
   Documents:
   Lenders
   will
   require
   detailed
   financial
   information
   to
   assess
   your
   business’s
   financial
   health,
   including
   your
   balance
   sheet,
   income
   statement,
   cash
   flow
   statement,
   and
   tax
   returns.
   Ensure
   these
   documents
   are
   up-to-date
   and
   accurately
   reflect
   your
   business’s
   financial
   situation.
   Having
   well-prepared
   financial
   statements
   can
   demonstrate
   to
   lenders
   that
   you
   have
   a
   solid
   understanding
   of
   your
   business’s
   finances
   and
   are
   capable
   of
   managing
   a
   loan.
5. 
   Build
   a
   Strong
   Business
   Plan:
   A
   well-crafted
   business
   plan
   is
   essential
   for
   securing
   a
   loan.
   Your
   business
   plan
   tells
   the
   narrative
   of
   what
   your
   company
   does,
   who
   it
   serves,
   and
   where
   you’d
   like
   it
   to
   be
   over
   the
   next
   few
   years.
   A
   strong
   business
   plan
   not
   only
   helps
   convince
   lenders
   of
   your
   business’s
   potential
   but
   also
   serves
   as
   a
   roadmap
   for
   your
   business’s
   future
   growth. 

Tips
for
Getting
Your
Business
Loan
Approved

Once
you’ve
completed
the
initial
steps
in
preparing
your
business
loan
application,
it’s
time
to
focus
on
strategies
that
will
enhance
your
chances
of
approval.
Here
are
a
few
tips
that
can
help
you
secure
the
small
business
financing
you
need:

1. 
   Showcase
   Your
   
   Cash
   Flow
   Management:
   Banks
   need
   to
   see
   that
   your
   business
   earns
   enough
   cash
   to
   cover
   the
   loan
   repayments
   and
   your
   regular
   expenses.
   Your
   application
   needs
   to
   show
   that
   you
   know
   how
   to
   manage
   cash
   flow,
   so
   be
   sure
   to
   include
   historical
   financial
   data
   and
   future
   projections.
2. 
   Emphasize
   Your
   Business’s
   Strengths:
   Every
   business
   has
   unique
   strengths
   that
   set
   it
   apart
   from
   the
   competition.
   Whether
   it’s
   a
   loyal
   customer
   base,
   a
   strong
   market
   position,
   or
   innovative
   products,
   make
   sure
   to
   highlight
   these
   strengths
   in
   your
   loan
   application.
   Highlight
   your
   competitive
   advantage
   as
   a
   way
   of
   helping
   lenders
   understand
   why
   offering
   you
   financing
   is
   a
   good
   investment.
3. 
   Be
   Transparent
   About
   Risks:
   While
   it
   might
   be
   tempting
   to
   downplay
   risks
   your
   business
   might
   face
   in
   your
   loan
   application,
   transparency
   is
   key
   to
   building
   trust
   with
   lenders.
   Acknowledge
   any
   challenges
   your
   business
   faces
   and
   outline
   the
   strategies
   you’ve
   implemented
   to
   mitigate
   these
   risks.
   Whether
   it’s
   addressing
   industry-specific
   risks,
   economic
   factors,
   or
   competition,
   showing
   that
   you
   have
   a
   clear
   plan
   for
   managing
   potential
   issues
   can
   reassure
   lenders
   that
   you’re
   prepared
   for
   any
   scenario.
4. 
   Tailor
   Your
   Application
   to
   the
   Lender’s
   Requirements:
   Different
   lenders
   have
   different
   criteria
   for
   approving
   loans.
   Some
   may
   prioritize
   your
   credit
   score,
   while
   others
   may
   focus
   on
   your
   business’s
   cash
   flow
   or
   collateral.
   Before
   submitting
   your
   application,
   research
   the
   specific
   requirements
   of
   the
   lender
   you’re
   applying
   to
   and
   tailor
   your
   application
   accordingly.
   For
   example,
   if
   the
   lender
   places
   a
   high
   emphasis
   on
   credit
   history,
   make
   sure
   your
   credit
   report
   is
   accurate
   and
   highlight
   any
   improvements
   you’ve
   made
   to
   your
   credit
   score.
5. 
   Explain
   How
   You
   Plan
   to
   Repay
   the
   Loan:
   Lenders
   don’t
   just
   want
   to
   know
   how
   you
   will
   
   use
   the
   loan,
   they
   also
   want
   to
   know
   how
   you’ll
   repay
   it.
   Be
   sure
   to
   include
   detailed
   financial
   projections,
   sales
   forecasts,
   and
   cash
   flow
   predictions
   that
   include
   your
   loan
   payments.

Conclusion

Securing
a
loan
can
feel
like
a
big
step
if
it’s
your
first
time
using
business
financing.
But
you’re
not
alone.
Over
40%
of
small
businesses
in
the
U.S.
applied
for
financing
last
year,
and
with
good
reason.
Business
financing
can
give
you
a
leg
up
on
your
competitors
and
help
you
break
through
in
the
noise
marketplace
to
reach
more
customers.
To
have
your
best
chance
at
getting
the
financing
you
need,
make
sure
your
application
is
thorough,
tailor
your
application
to
meet
lender
requirements,
and
double
check
every
detail
before
submitting.
Focus
on
building
a
strong
financial
foundation,
maintaining
good
credit,
and
presenting
a
compelling
business
plan
that
showcases
your
business’s
strengths
and
growth
potential.

FAQ
Questions

What
do
I
need
to
do
to
apply
for
a
small
business
loan?

Recommended
steps
include:1)
educate
yourself
about
financing
options,
2)
figure
out
how
much
you
need
to
achieve
your
goals,
3)
prepare
your
financial
documents,
and
4)
write
a
clear
business
plan.

What
are
banks
looking
for
when
reviewing
business
loan
applications?

Lenders
are
looking
for
a
strong
business
plan,
a
healthy
credit
history,
collateral
to
secure
the
loan,
and
a
clear
path
to
ROI
for
your
business.

What
financial
documents
are
required
for
a
business
loan
application?

Commonly
required
documents
include
your
business’s
balance
sheet,
income
statement,
cash
flow
statement,
tax
returns,
bank
statements,
and
a
detailed
business
plan
with
financial
projections.

What
are
the
top
ways
to
increase
the
chances
of
approval
for
a
business
loan?

Improve
your
credit
score,
provide
accurate
and
detailed
financial
information,
tailor
your
application
to
the
lender’s
specific
requirements,
and
clearly
outline
how
you
plan
to
use
the
loan
and
repay
it.

What
are
the
costs
and
fees
for
a
small
business
loan?

Fees
and
costs
will
vary
depending
on
who
your
lender
is
and
whether
they
are
a
traditional
bank,
credit
union,
or
online
lender.
It’s
essential
to
understand
these
costs
upfront
and
factor
them
into
your
financial
planning.

Frequent
searches
leading
to
this
page

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refinancing,

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business
loan,
unsecured
small
business
loan,
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business
loans
for
minorities,
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rate,
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business
lenders