- 1. Check your personal credit. Whether your business is new with little or no business credit history or long-established, lenders want to see how you handle your personal finances. 87% of businesses that applied for business funding in 2018 were able to get funding because of the owner’s personal credit, according to the Federal Reserve’s Small Business Credit Survey.
Check your credit reports to correct errors and deal with outstanding issues (like unpaid debts), and check your credit score. Many lenders require a minimum personal credit score in the low- to mid-600s or higher.
- 2. Check your business credit. Not all lenders require you to have an established business credit history. But start building business credit now; register your business with the credit bureaus if you haven’t already. If you do have business credit, check your business credit report to address problems and correct errors. Check your business credit score to see if you meet a lender’s criteria. (If you’re a QuickBooks Capital customer, you already have complimentary access to a free business credit score provided to our customers by Dun & Bradstreet.)
- 3. Business profile. Many lenders want to know how long you’ve been in business. Some require you to be in business for at least two years before they’ll consider lending to you. They’ll also want to see your revenue. Compile this information to see if you’re eligible for the loan you want.
- 4. Determine what you need the loan for. Many lenders will ask; besides, having a plan can help you focus how you spend these funds.
- 5. Know how much you should borrow. Be clear on how much you need and what you can afford to borrow. Calculate your potential payments to make sure they’ll work with your budget.
- 6. Narrow down your loan types. Figure out what kind of loan you need – do you need a short-, medium-, or long-term business loan? What can you qualify for based on your credit and business profile? Which lenders service your industry? Do you need a no-collateral loan? Do you need an SBA loan, a traditional bank loan, or an online loan that offers more flexibility for newer businesses and faster funding?
- 7. Clean up your accounting records and gather your documents. QuickBooks can make cleaning up and organizing your accounting records easier, especially when you’re getting ready to apply for a business loan. Many lenders, particularly for a traditional bank loan, want to see cash flow and income statements, a balance sheet, and may even ask for your personal financial statements. It’s also common to provide your business plan or key parts of it. Not all lenders need this level of documentation, though.QuickBooks Capital, for example, has a simple online application process that takes a few minutes, straight from your QuickBooks account and without the need for heavy documentation.
- 8. Shop for lenders. Look for lenders that offer the type of loan you need, making sure you meet their minimum credit, financial, and business profile criteria. Then, compare fees, repayment totals, ease of application, and speed of funding to find the best deal and ensure it’s a good fit. Find out if the lender is reputable before you apply; check with the Better Business Bureau and your state attorney general or state financial registration agency.
- 9. Apply. Be sure you’re clear about the application requirements and that you complete it accurately.
- 10. Review the offer. Once you have the offer, double check for fees or extra costs, and make sure it’s the lending product you want. Look for other crucial info and red flags in the fine print (like penalties if you pay the loan off early) BEFORE you sign. It’s worth it to make sure you understand the total cost of the loan.
Are you ready?
Sure, applying for a business loan takes some preparation, but doing the legwork ahead of time will give you a clearer idea of what you need and what you’re eligible for. Ultimately, this may help you get funded when you need it.