By Megan B. Shepherd
The business loan application process can be lengthy, requiring sufficient documentation, thorough underwriting procedures and credit checks. It can take longer if there are discrepancies or borrowers are not sufficiently prepared. According to Finder’s Consumer Confidence Index, about 36% of American business owners are considering getting a business loan. For those just starting out on their business loan journey, we’ll outline three simple tips that can take your business loan application from confusion and stress to ease and efficiency.
Consider a no-document or low-document business loan
At the top of this list is a way to simply skip the extensive paperwork you have to submit beforehand. Compiling financial statements and more can be difficult for small business owners with limited time or resources, especially if you need funding in a time crunch.
This is where low or unsecured business loans come into play. These types of lenders specialize in simplifying the business loan application process and facilitate financing without the usual paperwork. Low doc loans are usually offered by online lenders and credit marketplaces that connect to your financial accounts. This way, you spend less time collecting and organizing documents and more time comparing loans.
Not only will you streamline your application process, but you can get a decision in minutes or hours compared to the days or weeks it can take for a bank to approve your loan, and funding can be in your account in as little as 24 hours after approval.
For traditional lenders, gather all the paperwork ahead of time
If traditional lenders like banks or credit unions are speeding you up, you can streamline your business loan application by collecting all the necessary documents before starting the application process.
Create a checklist to collect the following information
- Three years of business and personal tax returns
- Balance sheets, profit and loss statements, cash flow statements, business debts
- A detailed business plan, including financial projections and how you plan to use your business loan
- Get your personal and business credit report and review it for any inaccuracies
- Make sure all licenses, registrations, contracts and legal documents are up to date
- Collect at least three to six months of business bank statements
Having all the required documents ready not only makes the application easier, but also reduces the need for back-and-forth communication with the lender to provide missing information. With a complete set of documents, underwriting can assess your eligibility and expedite the approval process.
Know exactly how much financing you need, are eligible for, and can afford
There are countless business loans, each with different terms and loan amounts. Your options depend on how much financing you need, if you meet the eligibility requirements for a business loan, and how you plan to use the business loan.
Start by asking yourself these questions:
- How much capital does my business require? Get specific. Create cost forecasts for the use of funds and estimate the income you can get from taking a loan.
- What will I use my funds for? Whether it’s for expansion, equipment purchases, or working capital, understanding the full use of the funds you intend to borrow can help you determine what type of loan you should pursue.
- My credit score, time in business, etc. what is? Consider your qualifications first so you know what types of business loans you may qualify for before you start shopping.
- What is my payment strategy? Consider your cash flow and sales projections when estimating which type of payment schedule will best suit your needs.
Once you’ve determined how much you need, one of the easiest ways to find out what type of business loan and terms you qualify for is to use the business loan marketplace to get loans and make your initial selection. This way, you can fill out an application and all the business loans, terms and loan amounts you qualify for are displayed in one step. The business loan marketplace helps you narrow down your options and choose a lender that specializes in the type of loan you need.
With the right strategies, you can simplify what is usually a difficult process. Start by considering a low doc loan to save you the most time and offer you the easiest. Otherwise, collect and organize the required documents, define your loan goals and access the business loan marketplace to make your business loan application process even easier.