Applying for a small business loan can be a little overwhelming. From understanding what the requirements are, to finding the perfect lender, to submitting your application, there’s a lot to do. And even if you get everything right, the statistics say that more than half of all small business loans are rejected.
We understand the challenge, and we want to help. That’s why we’ve created a range of easy-to-understand, in-depth guides on how to maximize your chance of success. It can be difficult to know what to read and when, though, so here’s our breakdown of our essential guides to getting a small business loan.
We provide small business finance and loan guides over several areas, and we’ve split them up as follows:
- Understanding the financial health of your small business
- Reducing costs and boosting profit margins
- Enhancing your cash flow
- Learning about types of small business loans
- Getting approved for a small business loan
Understanding the Financial Health of Your Small Business
See how your business is doing right now to get on top of your finances and make the best decisions for your funding needs.
An accountant will help you improve the financial health of your business. They will look at your overall circumstances and make suggestions to reduce your tax burden and manage your money responsibly. One of the best ways to find a business accountant is to ask the right questions.
Staying on top of your money and managing your finances well is essential to getting a lender to take you seriously. Our questionnaire highlights the questions you can ask to ensure the stability and growth of your small business and stay on top of your cash.
If you or your business are already repaying loans, it’s important to understand what’s due, to whom, and when. This helps you stay on top of your repayments and lets you know how much free cash flow you have to take on more debt. You can explore exactly what a small business debt schedule is, then get some advice on how to manage your debt to minimize loan-related problems.
The Fixed Charge Coverage Ratio (FCCR), also known as the Solvency Ratio, shows how well a business can meet its fixed charges and commitments. The FCCR is one of the measures used by lenders when they’re deciding whether to provide your business with a loan. Learning how to calculate and optimize your business’s FCCR gives you insight into the health of your organization and can increase your chances of loan acceptance and favorable terms.
Reducing Costs and Boosting Profit Margins
Bring your costs down and maximize your profits so you have more money to finance loan repayments.
Understanding your expenses will help you bring costs down and improve your profit margins—increasing the amount of money you’ll have to make loan repayments. Categorizing your small business expenses will give you much greater insight into where your money is going.
You probably don’t need to be paying out as much in expenses as you do. This guide helps you identify some common expenses you might have and shares ways to reduce them.
There are a surprising amount of obscure and hidden costs when it comes to managing your small business. Here’s how to identify them and what you can do to bring them down.
A healthy profit is essential to creating a strong foundation for growth and building up your small business. Focusing on your profit margin ensures you’re making enough money to keep the lights on, pay yourself, and expand your products and services. Overhead costs are often overlooked by small business owners. But through understanding your overhead costs it is possible to bring them down, increase your profit margins, and support business expansion.
Less money paid in tax means more money to fund business expansion and support loan financing. Use this checklist to make sure you’ve claimed all of the business deductions you can to reduce your tax burden.
Enhancing Your Cash Flow
Free up money in your business so you have financial liquidity to support your loans.
A cash flow statement is one of several financial documents that a lender will use to understand how money moves through your business and how much you have available for loan repayments. Learning how to create a cash flow statement is essential for presenting the financial facts about your business, like your net income, assets, liabilities, and investments.
The working capital cycle is an important financial concept for businesses that sell products to customers. It helps you understand how long your money will be tied up in stock and inventory. The working capital cycle can be used together with your cash flow statement to predict how money flows in and out of your business, as well as ensure you have enough cash-on-hand to meet your commitments, like debt repayments.
Increasing your cash flow will free up more money for expansion and debt repayments. Our guide lets you know about the practical things you can do to increase your positive cash flow and get more money in the bank.
Learning About Types of Small Business Loans
Understanding the types of loans that are available to you.
There’s plenty of jargon when it comes to loans, and it can be confusing if you’re new to the world of small business financing. We break down the most common terminology, to help you understand the important facts about your proposed loan.
When searching for loans and financing for your small business, it’s important to understand the difference between a secured and an unsecured loan. The type of loan you choose will affect your interest rate, repayment terms, and any claims that a lender might have on your small business or personal assets. Every small business needs access to responsible financing, so we’ll break down the differences between secured and unsecured business loans, and what that means to you.
Many lenders will require you to put up personal or business assets, known as “collateral,” to take out a loan. Even if you don’t have any collateral, you may still be able to get funding. Here’s how.
A business line of credit is a specialized business loan. It lets you borrow money up to a certain amount on a revolving basis. This means you “draw down” (borrow) against that amount as needed, then pay back what you’ve borrowed when you can—subject to lender requirements.
Lenders charge interest in a couple of different ways—and it’s important to understand your options. We’ll break down the differences between the two so you can decide what’s right for you.
A healthy cash flow is vital for any successful business, and there are a couple of services available that can free up money over the short-term. These are known as “invoice factoring” and “accounts receivable financing.” These services can be useful if you send out invoices and your customers don’t pay immediately, as they can provide upfront financing based on several areas.
Getting Approved for a Small Business Loan
Bringing it all together to maximize your chances of loan approval.
Most of us are aware that we have a personal credit score based on our history with borrowing and repaying money. What you may not know is that many businesses have their own credit scores too, and that can affect their ability to get financing. We break down the similarities and differences between the two, including how you can improve them.
Whether your lender is using your personal credit score, business credit score, or a combination of the two, here’s how to understand what they’re looking for.
Most lenders will use your personal credit score to decide whether to approve a small business loan—especially if you’re a relatively new business. That can make things more difficult if you have a low credit score. You may want a lender that will provide borrowing on your business credit only. As a “separate entity,” your business can have its own credit score, and you can use that score when trying to access financing.
Several of the steps for boosting your business credit score are the same as improving your personal one—using your credit responsibly, making repayments on time, and the age of your credit accounts
These are all very important, but there are several other steps you can take to establish business credit quickly. It’s worth boosting your business credit as you’ll get better access to business financing, you’ll pay less interest, and you’ll get more favorable terms.
Lenders receive thousands of small business loan applications every year, which means they have strict criteria for who will qualify and who won’t. It’s a lot of effort to apply for a loan, so you need to give your business the best chance of succeeding before filling out the paperwork. To help, we’ve gathered some of the most common questions that lenders ask, a brief explanation of each one, and tips to improve your chances of qualifying.
Here’s our step-by-step guide on how to get reasonably priced financing from a responsible lender. It will help you maximize your chances of success and understand how lenders approve small businesses for loans. We’ll guide you through everything you need to get accepted for the right loan at the right price.
We hope you’ve found our series of small business loan guides useful, and that they maximize your chances of getting the funding you need.