Your company needs money but selling equity to an investor isn’t something you want or can do. Before you approach a lender, however, you need to take a good look at your situation. That’s according to Evan Singer, general manager of the online Small Business Adminstration (SBA) loan platform SmartBiz, who says you’ll have a better chance getting a loan if you do several things first.
Assess your business and personal cash flow.
It’s the biggest thing lenders look for because you need to be able to afford the monthly loan payment. So, if your cash flow isn’t great, what can you to do remedy the situation? Also, what’s the longest term available to you? “Ask your bank what the term of the loan is, figure out what the monthly payment is, and then look at your cash flow to see if you can actually afford that payment,” he says.
Assess your personal credit score.
SmartBiz looks at the FICO scores of any business owner with more than a 20 percent stake in a company. “We need a good FICO score,” he says. “It doesn’t have to be perfect but from a public records standpoint you can’t have any bankruptcies, foreclosures or judgments within the last three years.” While SmartBiz will borrow to someone with a score as low as 620, banks vary where they draw the line. Try asking–Singer says sometimes a bank will disclose what kind of credit score it needs.
He suggests using a site such as Credit Karma to view your credit report and make sure everything on it is accurate. Credit Karma will also make suggestions for improving your score, such as paying down debt on credit cards.
Assess your business credit score.
If your company doesn’t have much credit history on record you add good payment history at Dun & Bradstreet to improve your score. “You can actually provide them vendors that you’ve been paying consistently and then they will take all of that information and give you a score,” he says.
Consider an SBA loan using SmartBiz.
It’s biased advice, to be sure. Nonetheless, Singer says the platform offers a 10-year loan term, an interest rate of 6 percent and loans from $5,000 to $350,000, with about a third of its loans dispersed to women-owned businesses. The company processed about $450 million in loans in 2014.