How to qualify for a small business start up loan

With many banks and other lenders being a little more cautious with loaning money to people, it is no surprise that small business owners are having a hard time being qualified for start up business loans. It is not impossible to obtain a small business loan. However, to increase your chances of qualifying for a small business loans, you should become familiar with the qualifying loan factors.

Repayment ability

Can you repay the loan? Many banks or financial institutions would want to know if the borrower has the ability to repay the loan back, before the banks decide to approve the loan or not. Showing you and your company’s ability to repay a loan back would be based on the monthly cash flow being generated and a review of your history of repaying other debt obligations. Using the credit report as proof When a lender or a bank is trying to determine your repayment history, they will usually look at your credit report to see if you have a good history of paying bills and loans in a timely manner. A business owner with a credit score of 640 or less will usually be denied for a small business loan, but a business owner with a credit score of 700 or higher will usually be considered for a business loan. However, other factors will still need to be reviewed. Past debt A small business owner who is carrying many debts is considered to be a high-risk borrower, and many banks do not lend to high risk borrowers. Banks usually view business owners with many debts as people who are only in business to pay back debt, not someone who is in business to make a future for their business.

Other major qualifying factors

Collateral To be a good candidate for a small business loan, a business owner should have at least three available sources of collateral to help repay the loan back such as cash, assets with a good resale value, and any other form of collateral. Having collateral is so important when trying to obtain a small business start-up loan since it shows the lender that they will receive something of value if the borrower defaults on the loan. Knowledgeable business owners Being a business owner is not an easy job. Many banks feel more comfortable loaning money to a business owner who is knowledgeable and has experience in the kind of business they plan on operating. If you are not an experience business owner, then having a partner or business advisor who is will help the lender in their loan approval decision making process.