What are the ways to improve your chances of getting a small business loan?

Small business owners have several ways they can obtain finance for their business. One is the regular route that comprises of banks and lending institutions and the SBA. The advantage of these regular channels is the low rate of interest and an extended repayment schedule that reduces the burden on the borrower. Borrowers may be required to furnish a guarantee and collateral. The process is not fast and such lenders usually have a number of norms by which they judge the borrower. He must have an exemplary credit record and his documents must show that he will be capable of generating sufficient revenues to repay the amount. The process does take some time.

For businesses that cannot follow this route, there are alternative options such as merchant cash advances and small business loans. Compared to regular channels these two options are considered easy for a number of reasons:

• A borrower need not prepare and submit extensive documentation such as project report or even the audited balance sheet and profit & loss accounts. He only needs to submit a bank statement, his identity proof and residence proof and proof of ownership.
• No guarantee or collateral is required.
• Money is made available within 4 to 5 days.

There is a catch. The interest rate is high. It can go as high as 50% or a minimum of 20%. The rate of interest is pegged on the risk factor as evaluated by the lender. Repayment may be short, which means a higher monthly or daily burden. The borrower must already be in business and must have minimum monthly sales in order to be eligible.

So, how to get a small business loan on the best terms?

Anyone can borrow provided he is in business, has minimum sales as required and can furnish the documents. However, getting a loan on usurious rates of interest is one thing and getting it on the lowest rate is another. If one does contemplate taking a loan for a small business in future, it is best to start preparations in advance such as:

• If a borrower has a bad credit score, he is perceived as high risk and interest charged will be on the higher side. He must work to improve credit rating.
• The borrower may be in debt and may want to borrow to clear debts. Lenders know that in such cases he can land in a debt trap so they raise the interest rate. Instead, it is helpful for borrowers to prepare a solid business plan and show that they intend to utilize the money to generate additional revenues in order to impress lenders and get the best terms.
• Prior to approaching a lender, it pays to get documents in order such as the bank statement for six months’ transactions, proof of identity, residence, and ownership of business.
• Borrowers may find it in their interest to generate higher credit card sales before they plan to go in for this kind of unsecured funding if they wish to get a higher amount or negotiate a better deal.

Consulting a lender like wscapnow gets the process started and borrower ends up with a good deal.

Blog source: https://wscapnow.wordpress.com/2017/03/14/what-are-the-ways-to-improve-your-chances-of-getting-a-small-business-loan/