Launching a small business is vastly different than the name might suggest. From product development to advertising, there are more demands of a small business owner than they can likely keep track of. One of the more impactful of these is the financing side of the business. Without correct and sufficient financial backing, even the best ideas will fail to catch on as a product or service. For many owners, it makes sense to attempt to secure a small business loan to cover any startup or initial operation costs. Between the ability to move forward with an idea and trustworthy backing, it makes sense. If one has never gone through the process of a loan application, it can seem quite daunting to the point of turning some away. However, lawyer and digital marketer Aruna Bhayan raised a counterpoint, “The biggest mistake a small business can make is to think like a small business.”
Securing a small business loan requires more than what meets the eye. Therefore, we connected with a few business experts to understand their essential steps to getting a small business loan.
What do you need?
Breanne Millette is the CEO of Bisoulovely, a brand offering jewelry for the modern starchild. She believes it is wise to educate oneself on the unique types of small business loans and which one is needed for a business.
“Just like with a mortgage or school loan, small business loans have some different characteristics which can benefit or eliminate some companies depending on certain criteria. For example, the U.S. small business administration offers loans specifically tailored for some small businesses through certain banks. On the other hand, there are loan programs out there for companies to buy equipment on a loan. Before you go too far down the loan rabbit hole, establish what you and your company need.”
Understand the qualifications
Flatline Van Co. specializes in sprinter and transit adventure van accessories. Their Co-Founder and CEO, Kevin Callahan, suggests looking over what is required of a company to be eligible for a specific loan.
“Banks will only accept a business which checks every qualification box of the small business loan. If your company falls short in an area or doesn’t fulfill certain criteria, the stamp of denial will quickly follow. You should know what you’re getting into before you go to the lengths required of you when applying for a small business loan. These banks will look for information related to your credit score, period of operation, income and more so if you don’t have clarity in one or more of these areas, brush up before your lack of knowledge hurts your business or wastes your time.”
Review lender options
It is critical to recognize the agency a small business owner has in securing a loan. Dymapak is a business providing certified child resistant packaging. Their CMO, Liza Kirsh, considers it helpful to realize this.
“Just like a person can approve or deny your loan application, you can choose to work with certain lenders or not. It’s important to remember that as you seek to gain that financial footing. There are public reviews and corporate ratings plus more indicators to aid you in your decision about whether you should choose to go into business with a particular lender. The nature of the application process can make it feel as if you have no control. You should never feel pressured into a situation revolving around money so be sure to review all your lender options.”
Analyze your budget
Alan Ahdoot is the Founder and Partner of Adamson Ahdoot, a brand offering personal injury attorneys. He advises others to take all financial restraints into account when planning for a loan.
“The reality is that there is no cookie cutter loan for small businesses. Each business is one-of-a-kind and all conversations or agreements involving money should approach the situation as such. Just because your friend who owns a small business got a particular amount of money on a loan at a certain rate does not mean you will be offered the same deal. On top of this, you should analyze your budget and what your company can reasonably dedicate towards paying back any amount of borrowed money.”
Set expectations based on current standing
Navi specializes in finding the perfect mobile phone and plan for everyone. Their Co-founder, Chief Customer Officer, Patricio Paucar, believes anticipating a particular answer is probable if one has sufficient knowledge of their company.
“When you apply for a small business loan, the people responsible for saying yes or no are going to do an incredibly deep dive into every nook and cranny of your company. It’s best if there aren’t any surprises for you. Furthermore, if you know where your company currently stands on all things related to credit score, assets, cash flow and more, then you’re going to develop some idea of whether a lender will see your company as a risk worth taking. Finally, if you are aware of issues present in your financials before you apply, you can work towards solutions that will appease a lender.”
The collateral question
There are cases where a loan is only approved if the party receiving the money offers security should they fail to meet payment demands. Anatta is a business providing DTC eCommerce. Their CEO, Nirav Sheth, proposes preparing for this.
“There are different types of loans available to be utilized by small businesses. Some of these require some financial backing from the small business before any exchange of money can take place. Is this something you or your company can do? If you’re able to, it could cause for a better rate or higher dollar amount to be given to you. There’s an obvious risk of losing something of significant value if things don’t go as planned. You don’t have total or nearly any control over a market so don’t turn your collateral question into one of gambling.”
Get organized
Karim Hachem is the VP of eCommerce of La Blanca, a brand offering swimwear and sportswear for women. He cautions others to ensure they have every document accounted for and ready to be viewed.
“Without concrete proof of who your company is, what they do, how they do it, and how they afford it, any lender worth trusting will send you away without any financial assistance. The lenders will want to see every paper detail, financial and otherwise. The fastest way to sour your relationship with your potential lender is to waste their time as you search for those elusive documents. A good relationship can make or break your ability to secure a loan so do everything in your power to keep things easy for your lender.”
Follow through
AdQuick specializes in out-of-home advertising. Their VP of Marketing, Lina Miranda, considers it necessary to finalize the process by officially submitting the application to the bank.
“After you have put all your ducks in a row, it’s time to fill out and submit the paperwork required to start a small business loan application. I won’t kid you, it’s an overwhelming amount of work and information being asked of you. This isn’t to scare you away, simply to prepare you for what is going to be asked of you and your company. Don’t let the intimidation factor get to you though. If you believe in your idea, then it’s time to finalize your application and take another step forward towards success. If you let intimidation get the best of you, it’s unlikely that you’re going to find your needed investment elsewhere.”
As seen above, there is much to go over before a lender can make your business official with its small business loan. There are many demands but meeting them head on is advisable. Being ready for a matter concerning the financial future of a company is the best course of action. Former professional football coach Joe Gibbs spoke to the importance of getting ready, “A winning effort begins with preparation.”
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