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Take these 4 steps to secure your small business loan in a good way

Everyone needs capital to realize a great business idea and most startups get their first outside financing by talking to friends or family. But at some level, your growing small business needs loans to expand operations and fund expenses.

Despite the recent good economic growth in the United States, banks are still reluctant to lend to startups, and this can only worsen as the Federal Reserve plans to further tighten the money supply.

But by taking the right steps, a small business can call a bank to get a loan or turn to other sources to get the necessary financing. Here are some important steps to take and concepts to understand.

1. Find the right lender and loan

There is a wide range of options allowing small businesses to obtain the loan that best suits their needs. The two most important things to consider are the institution from which you receive funding as well as the type of loan.

Your first option should be to go to a large national bank. Ideally, it is the bank with which you are already doing business. These institutions offer the lowest APR, offer the most options, and can offer you professional advice since you are a customer.

The disadvantage is that they are the least likely to offer you money unless you can provide a solid business plan and will not be useful if you need less than $ 50,000.

For small startups that may not need them, a better option is microlenders such as those listed here by NerdWallet. Companies that may need money quickly may even turn to online lenders, although these lenders offer a higher APR.

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In addition to finding the right lender, also know what type of loan you need. You can take out a business asset backed loan, a short term loan to deal with cash flow problems or a long term loan with a lower APR to grow your business.

2. Why does your business need a loan?

This is a basic question to which you probably know the answer to a certain extent, but giving a good answer is critical to your chances of success. Lenders, especially banks, want to lend money to a company that can show that it will grow. They will be less interested if you need money to make up for a shortfall.

When you meet the lender, get ready to explain how the loan will help grow your business and how you plan to repay it. The numbers can be of great help here. If you can predict your profits and future growth, it will help show lenders that you are serious about your business and its long-term viability.

Also set up a solid cash management system if you do not have it already. NASDAQ points out that mismanagement of cash flow is one of the biggest killers of new small businesses, and lenders will want to see that you can track bills, get paid and have a lot of money on hand for the emergencies.

3. Bringing Documentation

According to the lender, you will probably have to submit documents. Banks will usually need more documentation than a lender online or online. For example, they may request official proof of business ownership or a lease, as well as a more detailed description of how you will use the funds.

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But there are some basic documents found in a business loan directory that you should expect to provide just about anything. These include financial statements, business and tax returns, proof of the length of time your business runs and your average bank balance.

Do not hesitate to ask a lender what documents he needs before applying for a loan. Small businesses often do not do the best job of keeping their documents organized, so it is best to deal with this issue as quickly as possible.,

4. Ask for help

Lenders want to see that you have done your homework about the small business loan process, which means consulting an expert. Ideally, your growing small business should have a professional accountant who can provide information and links with other knowledgeable and interested people or groups.

If your company does not yet have the means to have an accountant, there are free ways to seek advice. The Small Business Administration and SCORE provide mentors and workshops that can help you learn about a variety of business topics beyond how to get a loan.

In addition, conduct research on all different types of lenders so you know which one can offer you the best deal. In general, opt for a loan program that offers the lowest APR, even if it means a higher regular payment.

It's hard to get a loan, but it also means your business is moving beyond fantasy and working in garages. By seeking the right advice and detailing how your business will benefit from a loan, you will get the funding needed to advance the next step of your plan.

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