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How to Get Approved for a Small Home Business Loan

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Published: 05May2010
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Applying for a business loan can be difficult especially if you are home business owner. Are there things that you can do to increase your chances of approval? If yes, check out the following tips:

1. Win your lender's trust. You need to convince the loan officer that your company can survive the market. Recognize your business's strengths as well as your weakness. All types of businesses face up to different challenges so you need to carefully plan your strategy.

2. Create an impressive business plan. A business plan needs to be precise and professionally created. Do not just include the basic details about your business such as the type and size of your company. Be sure that you include your market projections based on the marketing studies you have conducted.

3. Obtain financing from family and friends. Another option is to borrow additional funds from your friends or relatives. The important thing to remember with this kind of arrangement is that everything must be put into writing. Make sure that all parties involved agree with the stipulations in the loan contract. Having a signed contract can protect your relationship from misunderstandings that may arise in the future.

4. Seek potential business partners. If you know someone who wants to invest in business, why not propose a partnership? Again, make sure that everything is put into writing to avoid possible problems.

5. Seek help from the SBA. The Small Business Administration does not directly give financial assistance to small business owners. However, the SBA can help you get a faster approval from a potential lending company.

6. Find microloan programs. Microloans can be acquired from credit unions and private lending firms but the amount you can get may be limited to a smaller loan value. On average, microloans can go anywhere from $5,000 to $25,000 depending on the loan provider. Although the amount is not as big, obtaining the added financing can still be a great help for entrepreneurs who are starting up a business.

7. Enhance your personal credit. Prior to submitting your small business loan application, it is recommended that you check your personal credit report. Obtain a copy of your report from each of the three major credit bureaus since you cannot be sure which credit reporting agency a prospective lender will inquire your report from.

Check your report at least six months in advance so you can have sufficient time to improve your rating in case you need to. If there are errors, checking your report gives you the chance to request for correction. Why is it important to be concerned about your personal credit standing?

Since you have no corporate credit history yet, your personal credit history will be taken into consideration. Needless to say, a loan officer will be more inclined to grant you an approval if you can present an impressive credit rating.

Aside from getting easy approval, a higher credit score will also give you the advantage to enjoy lower interest rates and more flexible repayment terms with your small business loan.

Irish Taylor is a business loan consultant with Startup Business Loans and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to startup business loans, SBA loans and startup business credit cards.

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