5 tips to help you land a small business loan

1. Ask about lending options

Small businesses, even those that are quite new, have a variety of lending options available to them. This includes applying for a term loan which can be a suitable option for businesses seeking to acquire physical assets, such as equipment or office supplies.

A line of credit provides businesses with easy access to funds when needed. It allows them to borrow up to a pre-approved limit and only pay interest on the amount borrowed. While often used for short-term needs, repayment terms can vary depending on the agreement. A major benefit is that it’s open-ended. You can open a line of credit for your business, pay the balance down to zero, and then reuse the funds again, keeping the cycle going as long as the account remains in the draw period. Applying for a business credit card can be a good option for making smaller purchases, such as travel and everyday expenses. If a business doesn’t have credit history yet, traditional bank financing may be out of reach. In certain cases, experts recommend owners apply for personal loans and transitioning to business loans once the company has established itself.

2. Have a repayment plan

Choosing the right type of loan for your business depends largely on what you plan to spend the money on, when you anticipate you’ll be able to pay it back, and whether the expense is recurring or a one-time purchase.

One suggestion is to take multiple forms of loans to meet specific needs, such as taking out a long-term real estate loan if you plan on purchasing a building to either rent out or operate out of, and opening a line of credit to handle recurring expenses.

3. Gather the necessary information

To approve a loan, your banker is going to need your business’s tax returns – potentially going a few years back, depending on the size of the request. Your banker will also want to see financial documents that ensure your finances match the returns.

Be prepared to share your personal financial documents, including personal tax returns and financial statements. The bank will be on the lookout for any debts owners have that could have a bearing on the business loan itself.

4. Consider applying before you need the money

Even if things are going well, you might still consider taking out a loan. It can be in a business's best interest to apply for a loan proactively when momentum is trending upwards. Not only will the application process be easier, but it provides a financial buffer should your business hit unforeseen difficulties. Waiting to apply until those circumstances occur can make it more difficult to secure a loan when you need one the most.

5. Maintain a strong relationship with your banker

Working closely with your banker ensures you have someone who understands your business and its financial situation well. Think of your banker as a business partner or valued advisor. Let them know what is happening on a regular basis. A good banker will ensure lines of communication remain open. Make sure you stay in touch with your banker, so that when you are ready to start a loan application, there isn’t a lot of catch-up that has to happen. If you’re going through a transitional period and need more frequent contact, let them know. They’re there to help. So the bottom line is, having a good relationship with your banker is going to make it a lot easier to acquire credit from the bank.