Starting a business doesn’t mean you have to have everything figured out right away. While patience and preparation do lead to more sustained success, it’s rare that everything falls together in the right way to the point where you are 100% sure you are in a perfect position to open up your small business and start your entrepreneurial journey.
The biggest factor in preparedness to start a business is having the money to start a new venture, and people wait a long time until they feel financially secure, which could be worse in the long term. The solution to this is to apply for a small business loan with bad credit to secure the funding needed to help open the business and get backing that will make the venture come to life
There is a lot to know about getting a business loan, so it’s important to do your research before you think it’s the best move for you. Remember, there’s no perfect time to start a business, but there’s also no harm in doing your due diligence, so here is some information on how to be approved for a business loan, and other pressing concerns you might have.
How Do You Apply for a Business Loan?
First, you need to contact a bank or a creditor bureau. These are the two most common sources to acquire a loan. There are a lot of questions you’ll need to ask and information you’ll want to comb over before you do so, but you will contact these entities and inquire about loans once you’ve gathered the relevant information needed. Applying for a business loan is sometimes a process of trial of error depending on things like credit score or business health, but sometimes it’s as easy as submitting the proper forms and being approved, it all depends on the type of loan you need and how much the lenders trust you.
What Type of Business’ Qualify for Loans?
Typically, small businesses will look for an SBA loan, which is a small business administration loan. Bigger businesses can apply for larger loans through banks, but before you reach that point, you will be dealing with much smaller potatoes, so to speak. There is also the option to apply for a business line of credit to help with financing and expenses, rather than getting a loan. You can get loans for specific equipment needed for a business (heavy machinery for a construction business) as well. There is also the option to acquire personal loans and business credit cards for low cashflow, young small businesses.
How Long Does it Take a Business to Get a Loan?
It can depend on plenty of factors, chiefly the health and success of your business and your personal financial standing. Determining how much cash flow is coming into a business will help secure a loan much quicker, and so will a strong financial background from yourself (high credit score, no outstanding debt, etc.) but, using a business loan marketplace to shop around can also help find loans that are approved faster. There are plenty of places to look for lender agreements and requirements that can help it happen faster, it can be anywhere from a quick meeting to waiting months to be approved, so you should do your best to improve your business to secure one fast. It’s also important to note that it can often take over a year before you are deemed as a competent business that is capable of receiving a loan.
Are There Prerequisites or Requirements for Loans?
There are no prerequisites or requirements for a small business loan in a traditional sense. There is no set amount of cash flow you need, no concrete time requirement of how long you’ve been operational, etc. but those factors will play a huge role in the approval of a loan and how long it takes to get approved. Here are some of the factors for getting a loan:
- Type of Industry
- Age of Business
- Debt Situation
- Collateral-Backed Lending
- Cash Flow
- Credit Health
The problem is that it can vary depending on a lot of factors. The first is the type of industry you’re in. If you run a business in a safer industry that is expected to generate cash flow and won’t go under, then it will likely be easier. How old your business plays a role too, as a more mature business with a longer time in operation has a better chance of loan approval. A lower amount of debt from the business as well as the owner(s) and collateral-backed loans with assets against the loan are also favorable. Income and cash flow from the business is also a very healthy sign and grounds for a better loan approval chance and credit health for the owner(s) is another good sign.
What Are Reasons for Being Denied a Loan?
As you can tell, there are a lot of reasons for getting a loan, to which many have similar drawbacks. Owners with bad credit for their personal financial health are seen as more volatile to give loans to, so anything below a 700 personal credit score may seem risky by the lenders. The most concerning issues for lenders revolve around the business itself. A young business with no proven cash flow or sustainable income, or if it’s in an industry that is volatile or speculative could be harder to secure a loan because the lender is not sure if they can sustain growth or even achieve it. Carrying more debt than income is also bad, especially personal debt that is being paid off from the business as this could make the business require a longer time to eventually see positive revenue growth.
Sometimes a loan is necessary for a business to secure some kind of financial support to help with growth and expand the operations, but getting a loan is no walk in the park. Now that you have some understanding of important questions to ask, it can help you figure out how long it takes to get a loan, the ways to secure it faster, and how your business may qualify.