Expand your customer base?Increase your offerings?Strengthen your workforce? Patch up temporary cash flow snags?

If you don’t qualify for traditional bank loans, there are many alternatives to consider. Too many, in fact. Use our Small Business Loan Search Checklist to save time and focus on the funding that’s right for you.

What would you do with a cash infusion?••••

Keep these answers in mind while you go through the next steps.

1 What’s the purposeof your loan?

Ask yourself:Why do I need the loan? What’s my strategy for using the money?How much increased revenue do I stand to gain if this plan works out?How will I mitigate the damageif it doesn’t work out? How will the loan support my sales and marketing efforts?

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In basic terms, these will help you understand whether you can afford the loan and what you can gain from it.

2 How much should your loan payments be?

Don’t start shopping until you know what you can afford!You’ll need to know two numbers:

1. Your debt service coverage ratio (DSCR). The ratio of your revenue and your future loan payments.

2. The potential revenue increase you expect from the loan. Perform a small business loan performance analysis to find out. Use our templates to help.

3 Know your credit scoreBoth your business and personal credit scores are incredibly important.They tell lenders how risky you are.

Visit AnnualCreditReport.com or CreditKarma.com to check your score.

CREDIT SCORE

Safe bet Risky gamble

HIGH

LOW

It depends on the kind of loan you’re looking for, but generally speaking:How high does your credit score need to be?

Your score can be easily improved. Check out our blog to find out how.

800350

500 650to qualify

to get great offers

4 Which loans are best for your situation?

If you have excellent credit… Bank loan: The hardest to obtain and the lowest rates. Not often offered to small businesses. SBA loan: Designed for small businesses with great credit. The money still comes from the banks but the government partially guarantees repayment.

If you have poor credit… Short-term loan: 3- to 18-month term. Higher interestand more regular repayments — sometimes daily!Merchant cash advances: The easiest and most expensive loan. Repay a lump sum through your daily credit card sales.

If your business relies on invoices…Accounts receivable financing: Outstanding invoices are used as collateral. Ideal for helping with cash flow issues.

If you need a loan to purchase new equipment… Equipment financing: Equipment is leased (like renting) or loaned (like a mortgage). The equipment purchased acts as the loan’s collateral.

If you need the loan for frequent short-term purchases… Line of credit: Works like a credit card. Great for recurring short-term purchases like office supplies, payroll, or seasonal expenses.

5 Explaining fees and interest rates

Interest RateThe extra amount you’ll have to pay the lender for their service. If you borrow $50,000 and the interest rate is 10%, you’ll pay back $55,000.

APRAnnual Percentage Rate combines interest rate and other fees. It’s a comprehensive way to measure how much a loan will cost you.

Other possible fees include:Application fees Late payment fees Origination fees Guarantee fees Check processing fees Prepayment fees

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6 Beginning your application

You’ll need different paperwork for different loans. Here’s everything you’re likely to come across.

Bank statements (financial history) Business tax returnsRecent balance sheet (current assets, liabilities, and equity)Profit and loss (P&L) statementsBusiness debt scheduleBusiness credit report (A good business credit score is above 80)

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1. Business Financial Statements

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2. Personal StatementsPersonal tax returnsPersonal guarantee Resume detailing your business credentials

3. Legal DocumentsArticles of Incorporation paperworkBusiness license and registrationCommercial leaseFranchise agreementsRelevant contracts with third parties or suppliersLandlord Subordination Agreement

7 Putting it all together

With a small business loan,it’s not a good idea to “wing it.” The better prepared you are, the better your chances of receiving a loan quickly.

Organize and complete all the necessary documents before you apply for the loan, then submit them all at once.

Use the questions in Section 1 to create a first-rate business plan to submit along with your documentation.

8 Questions to ask yourself and your loan officer

“Can you make these loan payments easily

and comfortably, on time, every time?”

“What fees are associated

with this loan?”

“If you’re responsible with this loan, will you be able to get a better

one from the lender in the future?”