how hard is it to get a small business loan

How Hard Is It to Get a Small Business Loan?

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According to the Small Business Administration SBA, there are over 28 million small businesses in the United States.

While the number is high and impressive, many owners find it challenging to maintain their business and only two-thirds of these businesses make it through to year two. For those that make it, unfortunately, only half of the number makes it to five years.

How do you keep afloat through the money tides? Debt remains the cheapest and easiest financing your business can get.

However, how hard is it to get a small business loan? What are the necessary steps to take to ensure you qualify for a loan?

Read on and find out how easily you can qualify and set your business up for some capital infusion using a loan.

An Organized Business Qualifies Faster for a Small Business Loan

Disorganization is a big problem in many businesses, mainly because the owners wear most of the titles. They are first managers, marketers, customer executives, and others cling on financial decision making with little or no knowledge of the numbers game. 

With all that going on, keeping a clean shelf of records is challenging. From a lender’s eyes, meticulous financial documents represent a business owner with a plan. On the other hand, wishy-washy financial records or those blown out of proportion on income are the quickest way to be denied a loan. 

Get an experienced financial assistant to get your books in order. You can outsource an online bookkeeping professional and look presentable in a loan interview.

Financial Background Determines How Hard It Is to Get a Small Business Loan

Your career resume sets you apart from other applicants.

In the same light, your financial outlook is second to point one above. Lenders will want to ensure you can be trusted with repayment. Your creditworthiness on a personal and business level affects your chances of qualifying for a loan. 

Traditional lenders and SBA will perform a thorough background check on your past finances. The missed tickets and mortgages, not to mention piled-up credit card bills spell danger to any lender.

You might have a genuine case for non-payment, but lenders remain wary of offering small business loans to repayment defaulters. Get your credit report at least once a year online or have the bank monitor your credit account for free. 

A good credit score is anywhere from 600 upward. Anything below that requires fixing.

If you injected personal cash into the business using credit cards, build your business credit by settling those bills first.

How Long You Have Been in Business?

The first two years are rough on many startups, and those that make through to the fifth year have a surviving chance. Getting a small business loan immediately after opening a business is a hard nut to crack, and many lenders will keep away from startups. 

Both traditional and Small Business Administration establish the minimum business age to qualify for small business loans. Two years of struggle put you at the forefront of lenders, of course, with a good credit score and clean financial records. 

However, some specific online lenders will qualify you with as little as six months into the business with good records.

How Is Your Annual Business Revenue?

Lenders are impressed by your business performance over the years. How much revenue the business has generated is a clear indicator of your capability to repay the offered loan. From the figures in your financial reports, they assess how much to give and establish a favorable repayment plan for both parties. 

While most would prefer an annual revenue report, let this not keep you from applying for a loan. Some online lenders will ask for a shorter revenue report depending on your years of business operation.

How Hard Is It to Get a Small Business Loan on a Solid Business Plan?

The answer is simple: you stand a chance of getting a business loan on a good business plan because everyone, including lenders, needs to see a roadmap with clear trails and routes of where you are headed. 

A proper plan indicates a sense of direction and clearly states how and where revenue will come from but, most importantly, how the borrowed sum will be used. 

For example, you might apply for a wholesome amount, say $100,000. Suppose you go further and break it down in terms of allocation, such as $37,000 for inventory, $25,000 for equipment purchase or upgrade, $20,000 for personnel recruitment, and $18,000 for marketing and advertising.

In that case, the lender will have a clear picture, thus boosting their confidence in you and your business. Besides, a plan shows you have what it takes to run your game.

Don’t Be Greedy for More

As a business owner, covering all bases seems like an excellent idea. While applying for too many loans simultaneously might cover the ground in your mind, it’s an instant red flag to lenders. You get the option to pick from a range of offers, which in the end leaves you with none to collect the money from.

Every application small business loan you make is recorded, and lenders will use that information to guide them. Keep it simple and strive to apply for one loan at a time. Ensure a clean payment record for the same, then proceed for another if need be.

Get a Small Business Loan Today

How hard is it to get a small business loan?

Reports from the Fed indicate 44% of business owners say access to small business loans is their most significant challenge to potential growth. While this might be true, you shouldn’t entirely give up on a loan application. Make the first step by contacting professional loan reviewers to help you in the application process. 

Are you looking for a business loan to fund your startup? There’s a loan option for that. Reach out to us and we’ll hook you up with over 100 lenders ready to fund your business.

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