Starting a business is a daunting task, and obtaining a loan to finance it can be even more challenging. The Small Business Administration (SBA) offers loans to small businesses, but the process of applying for one is longer and more complicated than with any other loan. Traditional lenders view startup financing as “risky” and generally require that the company be at least two years old before considering an approval. Lenders are more likely to approve a loan application when consistent and positive cash flow can be demonstrated, ideally over several years.
Every small business owner should start somewhere, but not being able to show history of bank income makes it difficult to qualify for an SBA loan. How difficult it is to obtain a business loan depends on several factors, including the general economic situation at the time of submitting the application. Right now, for example, the approval rate for US loans is 13.5%, a tenth of a percentage point lower than the previous month of September. The reason why the approval rate is so low, compared to 27.3% last year, is due to the impact of the COVID-19 pandemic on small businesses.
Other factors that affect your ability to receive a loan include your company's credit rating, finances, how long you've been in business, and other banking requirements. If you want to apply for a small business loan and have considered going to the Small Business Administration, you might be surprised to learn that it's difficult to get a loan from the SBA. However, there are many alternatives to small business loans that may be a more suitable solution for financing your business. It's critical to set aside time to review your loan application line by line and then check the details when you're finished. Repayment periods extend to seven years for lines of credit, 25 years for real estate, and 10 years for other loans. From there, make sure your credit is in good shape, look for the best loan option for your situation, review the eligibility requirements and look for the best deal. Follow these tips and you'll get approved for a loan in the future and you'll get a small business loan that will help you develop your business and establish good business credit.
You might qualify for a business loan if you have bad credit, but be prepared to pay higher interest rates and fees. SBA loan alternatives typically have higher interest rates or less favorable terms, but may be easier to apply for. One of the most important factors a lender can consider when applying for a small business loan is your company's credit score and credit report. It's common to see a minimum personal credit rating requirement of at least 680 to obtain more favorable loan terms. However, there are also alternative ways to access capital for your business if you don't meet business loan requirements. Self-employed business owners can use some personal loans to cover initial or operating expenses or apply for business loans.
The better your business credit score, the better your chances of being approved for a small business loan. TMC acts as your advocate right from prequalification and continues to provide guidance throughout the loan process. SBA 504 loans are most commonly used to purchase real estate, such as land and buildings, but the funds can also be used to build, improve, or renovate commercial properties. Obtaining an SBA loan in today's economic climate can be difficult due to the impact of COVID-19 on small businesses. However, with careful preparation and research into alternative financing options, it is possible to secure funding for your small business venture.
Alternative lending options have really expanded over in the marketplace over the last ten years, there are many great options and many lenders who are helping small businesses grow. Check out our reviews of some of the brokers, they are available in most states and may be available in Canada as well, check out Best Loan Brokers New York City.