[This article was written by Anita Ginsburg.]
If you’ve ever applied for a business loan before, you know it can be a difficult process. It’s not as simple as a bank looking at your paystub and credit score. Rather, there are multiple things you should know when attempting to get a small business loan.
Your Business Credit Score
Just like you have a personal credit score, your business has one as well. Most people don’t realize this but vendors do report to the major business credit bureaus. These include Dun & Bradstreet as well as Experian. You’ll want to check the information included in your business credit report to ensure that it’s accurate. Any negative items that are inaccurate should be handled with the credit bureau before you apply for a business loan.
Smaller Banks Usually Mean Small Rates
Some of the best credit union branches out there will offer lower rates than your traditional big banks. While it’s important to note that you may have to go through more requirements when applying for a small bank loan, they do reward you with much better rates than you find at the bigger banks. This is because smaller regional banks and credit unions are designed to help small business owners grow within their local area.
When you apply for a business loan, you’ll need to be aware of the fees associated with it. Some lenders will require you to submit an application fee. Others will allow for a free application but will require that you pay specific origination fees when you’re awarded the loan. You should be aware of what these fees are from the very start. This way, you know what you’ll be charged for getting the loan so it can be factored into your overall budget.
Reasons for Denial
One of the most common problems that new businesses face when applying for business loans is denial. Each lender is a bit different in their loan requirements, so you’ll want to know what those are. If you get denied by a lender, make sure that you know why they denied you. By understanding the denial reason, you know what to fix to get approved in the future.
Applying for a business loan may be a necessary first step for you to get started with your own business. However, it’s important to go into the process with an open mind so that you can learn about how to easily get approved for the funding you need. The above four topic areas are ones that you should get familiar with.
Anita is a freelance writer from Denver, CO. She studied at Colorado State University, and now writes articles about health, business, family and finance. A mother of two, she enjoys traveling with her family whenever she isn’t writing. You can follow her on Twitter @anitaginsburg.