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Searching for a small business loan can feel a little bit like hitting the dating scene. You’re researching lenders wondering, “Will they like me? Or will they reject me?” Working at Nav, where we’ve played matchmaker between thousands of small business owners and lenders, I’ve observed several key steps small business owners and entrepreneurs can take to help make their business so irresistible to lenders that they can’t help but want to lend money.
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Be present online
Some underwriters may do a quick online search of your business. While this shouldn’t be news, yes, your business needs a website! Even if it’s just a landing page (well-written and attractively presented, of course) that describes your products and services and explains how potential customers can contact you. And no, a Facebook page or Instagram account is not the equivalent of a website.
Next, ditch the Hotmail or Yahoo email address for a professional one that’s branded to your company domain name. Nothing screams, “I’m not serious about my business” like a generic email address.
Be reachable and approachable
Always respond to phone calls and emails promptly so you can provide any additional information the lender needs in order to approve your application. Make sure you have a business phone number. You can use a service like Sideline, GoDaddy’s SmartLine or Google Voice to get a number that adds a distinctive ring and professional voicemail to your current cell phone, so you know to put on that professional demeanor when you answer the phone.
Show lenders the money
Great business ideas don’t impress lenders; great numbers do.
When you’re just getting started, you won’t have much in the way of revenues, but that doesn’t mean you can ignore this factor. Open a business bank account and, if possible, park some funds in that account and don’t touch that money. As your business starts to make money, make sure you deposit it into your business bank account. That’s true even if you use payment processors like Paypal; transfer those funds to your business bank account to boost the balance.
Online lenders will often analyze your bank accounts behind the scenes; you link your bank account with them and they analyze account activity to figure out how much they will lend. If you get a face-to-face meeting with a banker or investor, you’ll need to be able to answer questions about your financials. If you can’t comfortably discuss your business finances, ask your accountant for help or take a class on small business financials through your local Small Business Development Center or SCORE chapter.
It’s worth noting that if you’re using your personal bank account for business, there are plenty of lenders who won’t even give you a second glance.
Show off your credit
Yes, you can brag about your good credit scores. Strong business and personal credit makes lenders feel more confident about lending your business money. They know that if you’ve treated other lenders well by paying on time, you’re likely to do the same with them.
Some lenders will check an owner’s personal credit, some check business credit and some check both. There are lenders that don’t check credit at all; but the vast majority do some kind of credit check even if it’s just to avoid borrowers currently in a bankruptcy. If your credit isn’t something you’re proud to show off, work on it.
Start by focusing on your personal credit. Check your credit with all three major credit reporting agencies — Equifax, Experian and Transunion — at AnnualCreditReport.com. Check your credit scores to see how lenders may view that information. Then, start establishing business credit by doing business with companies that will report your payment history to commercial credit bureaus such as Dun & Bradstreet, Equifax and Experian.
Be aware of your status as a new business
Companies that offer business loans and financing love to do business with successful businesses. Many prefer companies that have been in business for at least two years. They often avoid businesses in high-risk industries and like to see that the business makes money and pays its bills on time.
At the same time, that doesn’t mean a startup is completely out of luck when it comes to financing. Some lenders will finance startups. There are even bank loans, including SBA-guaranteed loans, available to new businesses. Keep in mind though, credit requirements may be higher for a loan to a new business.
If there is anything risky on your business profile that may show up in underwriting, don’t try to hide it. Lenders don’t like surprises, and if they find out at the last minute that you have undisclosed debt or are trying to hide a business partner who has bad credit or a criminal history, for example, they’re likely to dump you.
To head off surprises, check your personal credit and your business credit with multiple sources — including Dun & Bradstreet, Equifax and Experian — in advance so you can confidently discuss anything that may show up, such as UCC filings or tax liens.
Always strive for better
Many new businesses are strong in some of these areas and weak in others. That doesn’t mean your business can’t get financing. There are lots of financing options out there, and you only have to find the right one for now to get the funding you need. Continue to work on those weak areas, and you’ll find that as your business grows, you’ll capture the attention of more and more lenders.