Applying for a small business loan can be a daunting process, especially when the approval rate is only around 25%. But don't let that discourage you. There are steps you can take to improve your chances of getting a loan from traditional funding sources. Here's what you need to know about getting a small business loan, including what documents to have ready, how to use the funds, and how to address bad credit and cash flow problems. Before applying for a loan, make sure you have all the necessary documents ready.
This includes a business plan that outlines your growth strategy and operations. It's also important to have a clear idea of what you'll use the funds for and how it will help your business grow in the long and short term. Additionally, lenders will want to know your credit score, so make sure you pay bills on time and keep your accounts open. When it comes to using the funds, it's important to be smart. Consider investing in equipment or hiring new employees that will help your business grow.
You should also make sure you have enough cash flow to pay off the loan. This is where the Debt Service Coverage Ratio (DSCR) comes in. It's a mathematical equation that allows lenders to know if your company will be able to return their money or not. If you're looking for an SBA loan, there are some additional requirements. Startups must meet the usual eligibility requirements for SBA 7 (a) loan consideration, but since they won't have a cash flow history that demonstrates their ability to repay the loan, they'll need to demonstrate business and industry-specific management experience.
Online and fully remote businesses are as eligible for SBA loans as their traditional counterparts. If you're denied an SBA loan, don't give up hope. You can submit a request for reconsideration to an SBA Disaster Assistance Processing and Disbursement Center (DAPDC). Alternatively, Square Capital* offers access to funding for small businesses without needing a lengthy application process. Getting a small business loan can be complicated, but it doesn't have to be. With the right preparation and knowledge of what lenders are looking for, you can increase your chances of getting approved.
And if you're looking for an easier way to access funds, Square Capital is here to help.