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Credit scores are an unbiased way of assessing the risk of doing business with you. In most cases, you will need good personal credit and an excellent business credit score to qualify for an SBA loan. But this depends on the individual lender and other factors such as your business revenue, cash flow, and track record.
So, you want to live the entrepreneur’s dream and start your own business? In order to do so, there are fundamental steps you will need to take -- one of which is getting approved for an SBA loan. Qualifying for a small business loan is much easier when you’re prepared. Below is a list of steps to take to increase your chances of getting accepted for such a loan.
Your personal credit score can range from 300 to 850. The higher your credit score, the better your chances of being approved for a loan and at a lower interest rate. Check your credit score to see where it currently stands and, if it’s on the low side, you can raise it by paying down credit cards and other debt.
Established businesses can view the business credit scores, which generally range from 0 to 100, at one of the following business credit bureaus: Experian, Equifax, and Dun & Bradstreet.
Determine in advance exactly how much you money you need to borrow, how it will be used and how you plan to repay it. This shows lenders that you’ve done your research and formulated a plan.
You may think your business plan is genius. But will the lender think that, too? You need to craft an elevator pitch that explains what your company will do, how it will generate revenue and why customers will pay for it.
One hard question lenders will ask is, “What if your business fails?” Lenders want to know that you are capable of paying back the loan -- even if your business isn’t successful. Consider what assets you have that can be used as collateral.
The approval process for a business loan through the SBA generally takes 45 to 60 days so it’s recommended to start early. Also, apply for a loan when your business is flourishing because it’s difficult to get funding when your business is struggling.
