Obtaining a small business loan is hard now-a-days.  With so many additional factors needed for banks to lend money, qualifications can sometimes be rigorous and take months to compile.  There are expanding selections for small businesses as alternative lenders now offer lending options that are advantageous for organizations seeking microloans.
For businesses looking to qualify and obtain such loans, there are three key areas lenders look at when determining an organization’s risk:  cash flow, credit score, and collateral.  While in the past all three were necessary, now with the rise of alternative lenders, businesses can obtain a loan missing one or even two of the crucial lending components.
  1. Cash Flow:  When preparing to apply for a loan, be prepared for lenders to take heavy stock in your business’ cash flow.  In determining risk, lenders will analyze your “bank accounts, in and out cash flows, accounts receivables, and credit card statements…Other key metrics lenders will look at are the average daily balance in your bank account, volume or number of deposits (each month), and total number of non-sufficient funds (NSF).”
  2. Credit Score:  This determines a business owner’s likelihood of loan repayment.  If you have a history of missing bill payments in the past, lenders will be less likely to grant you a loan.  According to Forbes, most lenders take a heavier stock in personal credit score versus your business credit score so keep that in mind when dealing with bills
  3. Collateral:  This items sits in your assets and can be used as leverage to increase your likelihood of loan repayment.  Lending organizations can use the asset as payment if your organization is unable to make cash payments.

The key is to keep as much cash coming into the business as possible.  From my experience the more cash that is coming into the business on a monthly basis the better.  In addition the more cash you have on head and higher credit limit the more likely you are to qualify for loans.

Start with paying off your credit cards and grow from there.  Next thing you know, you’ll have a small business loan on your hands.