How to Qualify for a New Business Loan

As a new business, you won’t have any financial or credit history to prove to a lender that you will repay a loan. However, you can still make some preparations in order to secure a loan to start a new business such as build personal credit and develop a solid business plan. Before beginning the application process, you can improve your chances of qualifying by doing the following:

  • Improve personal credit: Lenders may use your personal credit score as criteria for giving a startup loan. You’ll want to have a strong personal credit score over 700 to feel confident about meeting requirements.
  • Save money for a down payment: Not all lenders will require a down payment. However, new businesses that put 20%-30% down can qualify for a better loan.
  • Put up collateral: New businesses can secure a loan by putting up collateral. Collateral refers to an asset pledged to a lender in the event of a default. If the borrower does not repay the loan, the lender can seize and sell the asset to recover some of the loan. With a business loan, you can use collateral such as new or used equipment, land, or real estate.
  • Create a business plan: Lenders will want to know how you plan to repay the loan. New businesses should develop a business plan and presentation to prove that they have a plan to succeed and repay the loan.
  • Prove your experience: You have a better chance of qualifying for a new business loan by demonstrating previous work experience. Prepare a resume that highlights your success in business or partner with someone who has at least 5-10 years of experience.

The most powerful way to qualify for a loan is to build business credit. Consider applying for (and starting to pay back) a loan before you actually need it. You look much more attractive to a lender when your finances are healthy than when you’re facing a glitch, even if it’s just temporary. Inc.com reports that 60% of businesses that fail are profitable, they just didn’t have the cash flow to keep the doors open and the lights on.

In today’s business climate it may be challenging to get a small business loan, but it’s quite possible. And you can certainly help your chances by being as prepared as possible and concentrating your efforts where they’re most likely to succeed. Do the prep work before you apply, and you’ll get back to the work you want to do sooner rather than later. By coming up with a good strategy, building credit, and applying for the right loan, you have a better chance of securing funding to help start and grow your new business.

Do you need a loan? Get in touch with our lenders.

Our lenders offer simple and affordable loans to small businesses who find it difficult to borrow through a bank.

Camino Financials

Specialize in loans to Minority Owned Businesses. FICO 600 or better. 30% of our borrowers have no credit history. 50% have less than $1,000 in their bank acount at the time of the loan.

Camino Financial
Torro Loans

Small business loans approved in just under 48 hours!! Users can get approved for $10 000 - $500 000 without any collateral required, flexible payment options, no financials or tax returns and no credit references needed!

Go Torro Loans
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