The Small Business Owner's Guide to Getting a Business Loan

Written by
Rebecca Smith

Jul 25, 2018

Jul 25, 2018 • by Rebecca Smith

If you are a small business owner, you may already know that the odds are stacked against you. Most small businesses won't make it past the 18-month mark. According to Bloomberg's estimations, 80% of small businesses never survive beyond a year and a half.

Others calculations tell an even bleaker tale. Fortune reports that 90% of start-ups crash and burn during their first year out of the gate.

Want to know the number one reason that most small businesses meet their demise so early in the game?

Simply put, they run out of the cash flow necessary to keep their company afloat.

A small business loan could be the difference that determines whether your company will succeed or meet the fate of the unfortunate majority.

Find out how getting a business loan might be the key that saves your company from destruction!

Your Ultimate Guide to Getting a Small Business Loan

Whether you're just starting out, or have already established your brand in the business world, you need to have a backup plan ready in case of emergency.

These days, no company should consider themselves immune to financial turbulence. Even some of the biggest businesses in history have succumbed to failure when faced with major money deficits.

How can you be sure that your business isn't next in the long line of financial failures?

Learn everything you need to know about getting a small business loan before you need one. Then, when the time comes, you'll be prepared for financial adversity without throwing in the towel on your hopes and dreams.

Here's how you can get a small business loan when you need it most.

1. Build Your Business Credit Score

According to Entrepreneur, the number one reason that small businesses get denied loans is due to an unsatisfactory business credit score. Even more disturbing is that most of the small businesses that get turned down because of this critical number, don't even know that it exists. And those that do, don't know how their score is calculated.

However, your business credit score isn't really as difficult of a concept as its made out to be.

Many small businesses max out every possible line of credit when they are first starting out. In addition, they may not make timely payments on accounts established in their business name. It's mistakes like this that add up to wreak havoc on a company's credit.

Instead, play it smart and only use credit when absolutely necessary.

Make a habit in your business's early days of paying all of your bills on time and maintaining a good standing with creditors, including utility companies, credit card companies, the IRS, and any additional monthly or annual bills that are owed.

2. Loan Applications Should Be Taken Seriously

In today's world of instant credit, payday loans, mega financial aid packages, and rent-to-own merchandise, many people fall into major debt without so much as a thought about what they are doing, even as they are doing it.

We have become blind to the mountains of debt that we create in our personal lives and on behalf of our companies. Then, we are astonished when we are turned down for a loan.

The truth is that many of us cannot afford to pay the credit that we owe.

When getting a business loan, you should be prepared to prove to the lender that you can be trusted to pay back the money they are lending you.

Loan applications should be taken as seriously as we take applying to a job that we really want or to the college we're aching to get into. When we attempt these applications, we work hard to show decision-makers that we have what it takes.

We put together a first-class portfolio, complete with examples of our greatest prior professional success stories. Or, we might spend hours writing a perfect essay, and include references, honors, transcripts, and awards that we have received.

Yet, when we apply for a loan, we often rush through the process.

Consider your credit report, collateral that you can present, past loans that you have paid, on time and as agreed. A bank will be much more likely to lend money to someone who is worthy and appreciative of their time and investment.

3. Dig Deep

Before getting a business loan you should ask yourself a series of questions, and answer them honestly.

How much money do you really need? What will the funds be used for? Can you afford the required payments?

Write down the questions that you feel are relevant, and record your answers as well. Later, review what you have written to help you determine if getting a business loan is the right thing to do. Not only that, you should also be able to decipher if the funds are necessary, or if you can make do without borrowing.

Then, do the same for your lender. Be prepared to ask them questions that might help you understand their expectations and terms clearly before you sign on the dotted line. All too often, we take money from lenders without grasping the agreement that we are entering into.

4. Consider All of Your Options

All loans are not created equal. You will find extreme variations exist if you take the time to consider all of your options.

Some of the loans for small businesses that are easy and quick might also be the least productive in the long-run. While others, such as SBA loans, might be a bit more complicated, but turn out to be an excellent lending resource for small businesses.

You can read more here about the advantages of SBA loans and the qualifications that companies must meet to receive funding.

Want to Find Out More Ways to Create Small Business Success?

Getting a business loan can certainly help fund your company when you are crunched for funds. But, there are lots of additional ways that you can safeguard your small business.

Want to find out more ways to maximize your small business potential?

Check out this post to find out how you can make your small business website shine, even when you're on a budget!