Get Easy Business Loans in 3 Simple Steps
Getting a business loan for a startup is anything but easy.
In fact, for many small business owners, it’s impossible.
Banks will only give out small business loans to entrepreneurs with stellar credit scores, have steady annual revenue and have a long transaction history.
Online business lenders are more flexible, and their easy application and approval time takes less than 24 hours. They don’t require a significant amount of paperwork to approve your loan request, but their lending cost is so high.
So where do small business owners turn to for easy business loans?
In this guide, you’ll learn why banks shy away from small businesses, how you can get small business funding in 3 easy ways, and how to vet lenders.
Why do small businesses struggle to get funding?
It is an indisputable fact that 50% of small businesses fail in their first 5 years of inception.
Many startups cannot withstand the financial ups and downs during their initial stages and may be forced to close down.
Lenders have a notion that these businesses are risky and chances of them paying back their debt are minimal compared to established businesses.
For that simple reason, they prefer businesses that have been in operation for more than two years with a proven transaction history and a stable annual revenue.
This, therefore, makes it difficult for entrepreneurs to get small business financing to realize their goals.
How can small business owners get loans?
To increase your odds of getting approved for easy business loans from any lender, you have to be fully prepared for the loan search.
You have to know what lenders are looking for and how to qualify for funding.
Here is what you need to do to get the best business loans hassle free:
- Work on your personal credit score
You may be wondering why your personal credit score should be a factor in qualifying you for a business loan. Truth is, it all boils down to you. You are the one running the business and will be responsible for paying back the loan. Lenders want to be assured that you are reliable and can pay back the loan in full and on time. A stellar credit score of 650+ is an indication that you can be trusted and that your delinquency rate is low. With a high credit score, you can qualify for huge loan amounts, better repayment terms, and very affordable interest rates.
A struggling credit, on the other hand, minimizes your chances of getting business loans. The beauty is, you can always improve your credit scores to qualify for better loans.To build your credit, you can:
- Check your credit reports and report if there are any anomalies that do not reflect the real picture.
- Pay all your credit card bills and debts on time.
- Keep your credit utilization below 30%
- And don’t close your credit accounts
- Determine how much you need and for what reasons
As your business grows, it will require more working capital to purchase business assets and equipment, take advantage of new business opportunities, restock, or even just cash to cushion your inflows. It’s important to do a financial analysis to identify how much your business needs and how you intend to use the money.
Lenders will want you to clearly articulate these needs and they should see that your business can afford to pay back the loan. In determining whether you can afford to make repayments, lenders will calculate your debt service coverage ratio (DSCR). A number less than one indicates that your business doesn’t have the cash to pay back their debt. The formula is pretty simple: cash flow/loan payment = DSCRIf for example, your sales revenue minus all the expenses is $2000 and your projected loan payments is $800, then your DSCR is 2.5. this is quite healthy and makes you eligible for funding.
- Compare loan offers and apply for the one that suits you most
When looking for best small business loans, it’s important to compare options and settle for the most affordable. Lenders charge different interest rates and APR on their loans. It is, therefore, important to go for a loan that will not cut into your profits. Once you identify a business lender whose terms you are more comfortable with, you can fill out their loan applications. If you are approved, make sure you read and understand all their terms before appending your signature on their loan agreement form. To increase your chances of approval, make sure you adhere to the requirements of the business lender. Attach all the necessary documentation like bank statements, previous debt schedules, business plans and many more.
Some of the best business loans
Depending on your credit score, you can qualify for affordable or high-interest rate loans.
If you have good credit ratings, you can be eligible for:
- Long term loans from traditional banks
These loans are ideal for businesses owners who have a near perfect credit score, have been in business for more than 2 years, have a stable annual revenue and are quite profitable.
If lenders trust you, they are likely to charge you less and give you flexible terms because they are sure you will not default.
- SBA loans
Small Business Administration is a government agency that guarantees loans for small business owners. They don’t lend money but guarantee borrowers to lenders in a bid to reduce lending risk and increase business resources for entrepreneurs. It guarantees up to 85% of business loans but to qualify for this guarantee, you have to have a good credit score. Borrowers struggling with their credit can apply for short term loans that they can pay quickly to help build their credit scores to make them more eligible for loans with better terms.
When looking for easy business loans, it’s important to work with lenders with the following qualifications:
- Have a simplified application process – can accept online applications.
- Are more flexible – they should have minimum qualifications.
- Have approval speed – they should be able to review your loan application and approve your request as fast as possible.
- Funding speed – after approval, funds should be credited to your bank account in less than 24 hours.
Do you still need easy business loans? Above, is all the information you need to get started. Fill out our loan application forms and let us connect you with reputable lenders how’ll help you grow your venture and realize your financial goals.
We can make the process less daunting for you.