Getting a small business loan can be a daunting and intimidating process. But it doesn’t have to be that way! Preparation is key when it comes to taking out a loan or any type of financing. See this list of tips to ensure you are well prepared to start the underwriting process so you can get the money you need to start or grow your dream business!
What to do:
- Register your business name
- at the county recorder’s office where your business is located, to formalize it.
- Open a business bank account
- and keep it separate from your personal accounts.
- Protect your credit;
- do not open credit for others and check your credit report annually on annualcreditreport.com.
- Report business income and expenses accurately on your taxes;
- it is better to pay a little in taxes on your profits than to report losses and then not be able to get credit for your business because it does not seem to be a profitable business.
- Plan and or hold capital before you need it;
- as long as you still have money in your bank accounts and before you exceed the limit on your credit cards because it’s less risky for a lender to see that you still have sources to make the loan payment.
Here are some of the common mistakes that small business owners usually make before applying for a loan.
What not to do:
- Don’t mix the personal with the business.
- Keep accounts and a budget for your business separate from your personal expenses and income, so you can identify the actual tax health of your business (and the lender too!)
- Don’t start without a clear plan.
- If you are starting a new business, get free advice and plan well before opening the doors and you will be more successful
- Don’t quit your job.
- before your business can pay you enough to replace that source of income.
- Do not take predatory loans (interest of 30% or higher,)
- Loans with daily or short-term payments will affect the fluidity of your business.
- Do not sign a lease before loan approval.
- If you rely on the loan to expand your business, make sure the loan is approved before signing the contract with the landlord.
- Don’t use your credit cards to fund your business.
- Unless you can settle the balance within 1 to 3 months; credit cards are for short-term costs such as inventory, not for startup costs, equipment, or other long-term investments.
The Accessity team is highly experienced and can answer any questions and provide you with free resources such as business, financial, credit, and more advice. Please feel free to contact us here.
This information is shared for educational purposes only. Please consult legal, tax, credit, or financial experts for specific guidance.