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How To Apply For A Business Loan Winston Rowe & Associates
There are many options for small business loans from traditional banks to private money lenders.
There is a lender due diligence process with a stringent application process that can be extensive.
Here are 5 ways to be prepared for a small business loan due diligence process.
1. Prepare to Explain the Reasons for Your Loan
In order for a lender to approve your loan proposal they will need to see a convincing reason for the funds.
If you are just going to use the money to pay off other debts, lenders will not be impressed.
They want to see that you will use this new working capital to grow your business and increase your revenue, making it easier to repay their loan.
This is known as your exit strategy.
2. Prepare to Qualify
When deciding whether to loan you money, a lender will want to know your business credit score, how long you've been in business, how much your company brings in annually and how you plan to repay the loan.
Yes, FICO does matter. If your credit score is too low or you have not been in business you may not be able to qualify for certain small business loans and may have to apply for alternative funding in the secondary markets.
3. Prepare to Apply for the Right Loan Type
Fortunately there are plenty of different types of business loans to choose from.
With good credit, a FICO Score of 700 and above with years of business history, your options are wide open.
SBA loans offer credit interest rates and terms. A business line of credit could also work for short-term needs.
Invoice factoring is a good choice if you have lots of purchase orders.
4. Prepare to Apply with the Right Lender
Banks and credit unions are among the most traditional lenders, but they also employ the strictest credit standards.
The secondary market of private money and asset based (hard money) lenders still have strict standards, but work with clients that can't get financed by traditional banks and credit unions.
5. Prepare the Documents
Almost all loan applications will require the same type of documents.
These include business and personal tax returns and bank statements as well as financial statements and any documents showing the licensing of your company.
Pulling these together beforehand can save you time and headache.
Winston Rowe & Associates, a national due diligence firm for complex commercial real estate transactions developed this article.
For more information about them, they can be contacted at 248-246-2243 or by visiting their website at http://www.winstonrowe.com