Top 25 Expert Recommendations to Improve Your Own Small Business Loan Application

1. Determine How Much You Want & How to Use It

Jay DesMarteau, Head of Commercial Specialty Segments, TD Bank

Before you talk to a lender, you need to assess your need for financing, how much you plan to borrow, and how the cash will be used. Lenders would like to see that a clearly defined need, which means you need to be able to demonstrate this information to them clearly throughout your meeting.

2. Be Ready with the 5 C that Most Lenders Care About

Sam Hodges, Co-founder & US Managing Director, Funding Circle

Although different lenders have different credit standards, most of them care about your own 5 C as it comes to a loan program. These 5 C are your capability to pay off the loan, how much additional capital you require, the present state of your business, the security you use to ensure the loan, along with your general personality for a business proprietor. Be prepared with these 5 C through your loan application and you’ll have a larger opportunity to qualify.

3. Have a Great Credit Score

Steven Millstein, CFA & CFP, Credit Zeal

Although different lenders have diverse credit rating requirements, acquiring a top personal credit score — ideally 700 — may significantly assist with your loan application. Most lenders consider both the business and personal credit scores, so make certain to maintain a good score for both. Your credit score ought to be confirmed by the three major credit reporting agencies.

For more information, have a look at our final guide company credit scores.

4. Have Sufficient Cash Flow & Liquidity

Joel Keylor, CEO, Tresle Inc..

When applying for a small business loan, most lenders will generally require a minimum of 20% to 25% as a down payment. This means you should have enough cash on hand to be able to cover this amount. Additionally, lenders may want to see your regular cash flow and whether it is sufficient to cover the monthly payments.

5. Invest in a CPA as Early As Possible

Trey Ramsey, CEO & Co-Founder, Braggawatt

Consider hiring a CPA to perform a review of your company’s financial statements in an annual basis. While this can add prices to your business, presenting a creditor with historic financials that have already been individually reviewed by a CPA can mean the difference in eligibility or approval rate. This cost is actually an investment particularly when you are going to be needing funding to fund your growth or growth.

6. Prove Your Ability to Repay the Debt

Bryan Doxford, Chief Lending Officer, Excelsior Growth Fund

Qualification requirements typically differ from lender to lender. However, all lenders need to be certain that your business has the capability to repay your debts. So before you apply for a loan, be sure that you prepare all necessary documents that will prove your capability to cover the loan. These records include business plan and plans, business and personal tax returns, and newest financial statements.

7. Build Relationships with the Loan Officers

Jesse Harrison, CEO, Employee Justice Legal Team

Good personal relationships with loan officers will go a long way. At times the loan officers act as they are just the frontliners and they have no power to help you with your loan application. But once you build relationships together with your people skills, you’ll find that these people have a good deal of power and can mean the difference between acceptance and rejection.

8. Target the Right Lender

Paul Koger, CEO, Foxy Trades LLC

Shop for loans from as many creditors as possible to discover a financing together with the lowest interest rate and best terms. If you are creditworthy, the banks will reduce their interest offers when they find out you are also speaking to other banks. Some lenders are more keen to approve a client the very best terms possible in order to win them over even though there is no real competing offer.

9. Be Prepared For Your Loan Demo

Kala Gibson, Head of Business Banking, Fifth Third Bank

During your loan demonstration, the bank wishes to comprehend exactly what you do, exactly what your needs are, and how they might have the ability to assist you without placing them in unnecessary risk. Get prepared to explain this and to answer further questions from lenders. The most essential things to include in your loan demonstration are your plans for the business, how much you want to borrow, and how you want to repay it.

10. Know the Requirements & Process of the Lender

Jeffrey Bumbales, Marketing Director, Credibly

Various lenders use different standards to evaluate a company’s health and have different timelines for acceptance, so a basic understanding of their needs and procedure will help you better your program. Prior to applying for a loan, do your research and find out what are the lender’s requirements and their process to get financing program. You will be better prepared when you have sufficient understanding about this information.

11. Understand Your Company’s Risk Profile

Kemener Whalen, CFO, BlackRock Construction

You must understand that the lender is taking a risk. That having been said, it is best that you know what those risks are and understand the way the creditor will see those dangers. The more you can demonstrate that you understand your company’s risk profile — and esteem the risk the lender is taking — the more they will feel comfortable with you as a business owner.

12. Give Truthful Information On Your Business

Stuart Blake, VP of Sales & Client Success, BlueVine

When applying for funding, you need to emphasize the advantages of your organization but it’s also wise to resist the temptation to paint a less-than-truthful image of your enterprise. Don’t attempt to fudge the numbers since it generally gets exposed at the end and it could hurt your chances of approval. Never compromise your integrity or the integrity of your business.

14. Purchase an Accounting Program

Thomas J. Williams, EA, Tax Accountant, National Association of Enrolled Agents

The underwriting department relies on strong figures and ratios, and therefore you want to ensure your bookkeeping is in order. To do this, you should put money into an accounting program that offers an organized presentation of your financials. Since the approval process depends on an accurate representation of where your business stands, a reliable accounting software is likely to earn a fantastic investment for your business.

For more information, head over to our final guide on the best small business accounting program .

15. Maintain a Great Debt Service Coverage Ratio

Yuko Kawamoto, Finance Staff, Creator’s Guide

Most creditors will consider your business’s debt service credit ratio (DSCR) when approving a loan. Your DSCR measures your available cash flow to pay your present obligations. Most lenders will require a debt service coverage ratio of 1.25 or greater because it shows you could pay your obligations and still have a buffer for unexpected expenses.

16. Consider Other Loan Types

Darren Schulman, Chief Operating Officer, 6th Avenue Capital

The procedure for applying for a small business loan usually takes time. Whenever your funding need is immediate, think about other loan types, such as a business line of credit or a retailer cash advance. These types of loans usually have quicker turnaround time. You can get accepted in a couple of days or even hours and may get financed in a week or less.

17. Write a Fantastic Business Plan

Deborah Sweeney, CEO, MyCorporation.com

One approach to enhance your small business loan program would be to write a comprehensive business plan. Developing a conventional business plan permits you to be detailed and objective about your small business. It should pay for an executive summary, business description, concept, strategy, business and market analysis, management and organization, fiscal projections, financing petition, and an appendix.

For more information, you can read our article on how to write a business plan.

18. Apply For the Correct Loan in the Right Bank

According to Smallbusiness.com, there are some banks which don’t contribute to certain businesses, like hotels. When searching for a loan, make certain to go to a bank that really lends to your industry. Further, as there are lots of kinds of small business loans available, it is ideal to make sure that you are applying for the ideal kind of loan which best suits your company’s needs.

19. Have an Internet Presence & Update Your Postings

Most creditors will likely do their own search on you and your business. Capital With Strategy says it is best to have both personal and business online profiles. Some lenders will examine the information about your small company available online, as well as some advice on its main owners. With this, it is ideal to keep your online postings and profiles upgraded.

20. Repair Any Errors on Your Credit Report

It is important to review what’s written on your credit report from time to time to ensure that the details are accurate. According to SalesForce, it’s important to repair the errors on your business credit report as soon as possible, as it might take about 30 times or more for business credit bureaus to solve a problem. Further, wait until the agencies resolve the dispute before you apply for financing.

To learn more, you can check out our article on business credit reports.

21. Have Good Personal Character

Even though it is not directly stated in the list of requirements, lenders look at your moral and ethical personality prior to making a last choice. Your personality is a direct representation of how working together with you’ll be like for your creditor, this is precisely why Kabbage recommends that you should be on your best behaviour.

22. Get More Than One Payment Strategy

When applying for financing, AllBusiness.com suggests that you choose which sort of financing you need, what your purpose is, and how much time you plan to repay the loan. It’s best to prepare a few different payment plans to present to the lender. In case you have a clear payment program and a backup, you are going to appear to be a responsible borrower that will increase your likelihood of approval.

23. Fully Understand the Small Business Lending Process

According to Forbes, the more educated you are about small business financing choices and procedures, the more likely you will have the ability to improve small business loan program. Learning the technical banking and monetary terms used by creditors and knowing the perfect credit ratings and debt-to-income ratios will help you prepare better for your loan application.

24. Pay Off Other Debts Before You Apply

Jeff White, Staff Writer & Financial Analyst, Fit Small Business

The less money you have when you apply for a small business loan the easier it’ll be for your own loan to get through underwriting. Many small business owners take home bonuses every year with surplus small business cash, but if you’re planning to acquire a loan soon then you should use the cash to repay your other debts.

25. Boost Your Collateral Coverage Ratio

A collateral is a personal or business asset used to secure financing. When you’ve got a good security to secure financing, you have a greater chance of approval than when you don’t. Most lenders will typically require a collateral if you’re asking for a larger loan amount, if you cannot show sufficient cash flow, or if your credit score isn’t so high.