Businesses around the country are still struggling after the recession that hit in 2008. The tightening of the lending market since then hasn’t helped either, with the majority of big banks steering clear of small businesses and new ventures. This has made it incredibly tough to secure funding for an e-commerce organization lately.
However, some of the most recent small business financing trends show that, while the upcoming presidential election may continue to derail the economy somewhat, there is continued growth in the online lending market, and banks are likely to ease back into lending to small ventures too.
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If you’re in need of funds to either launch an e-commerce store or grow an already operating one, now may be the right time to go about it. If you need to gain access to funds in a hurry though, you want to make sure you go about the process in the best way. Read on for three tips you can follow today to make it as easy as possible to secure a loan.
Have your paperwork in order
The first step you need to follow if you want to get a loan approved in a hurry is to ensure that all of your paperwork is in order. This includes your business accounts, as well as other things such as a business plan and tax returns. Remember that lending institutions won’t consider applications at all if they can’t take a look at your current accounts, plus your projections and plans for coming years.
Lenders only want to give funds to people and businesses that they see as a safe financial risk. They need to believe that you will have the capacity to pay the funds back, in full, on time, and with interest. To display this ability, you need to be able to provide current financial records. This includes not only those for the business, but also your own personal books, as you may have to provide collateral as security, particularly if your business hasn’t launched yet.
Before you submit a loan application, make sure you have tax returns completed for both yourself and the business (if applicable) that you can present. If possible, it’s best to have around five years’ worth of returns that you can show them if they ask for it. As well, make sure you have a detailed, current business plan drawn up. Don’t submit something that you wrote a decade ago and haven’t altered since — a business plan should be up to date and detail the venture’s trading history, points of difference, future projections, strengths and weaknesses, and so on.
Lenders typically also want to see, in writing, some information on your reason for seeking a loan, and how you plan to spend the cash in the business once you have it. You should make it easy for lenders to see the monetary benefit that you have calculated will result from the injection of cash. This will show them that you plan to use the funds in a responsible way.
Research lenders
Next, spend a decent amount of time researching the lenders in the market. You don’t have to limit your loan applications to just the bank you currently use, or the institution up the road — there are lots of different lenders to choose from, including many which are purely operated online.
The decline in bank lending after the 2008 recession led to rapid growth in the alternative lending market. Nowadays there are plenty of such organizations which can approve loans and release funds within just a couple of days, as well as niche alternatives such as crowd-funding or industry-specific loan programs.
To get a loan approved quickly you need to direct your applications to those organizations which have lending criteria that meets your profile and suits your needs. This will give you the best chance of success. After all, different lenders have different requirements, so there’s no point spending time and effort on applications which have no chance of being approved.
Don’t apply for more funds than needed
Another tip for getting the green light on a loan application is to not ask for more funds than you actually need. You don’t want to get greedy and ask for extra cash “just because,” since the higher amount might tip your application into the decline category. Keep in mind that smaller loans (which are generally classed as those up to US$50 000) present a lot less risk to lenders than larger loans do. If you only request a low amount, it will be easier for your application to be approved and finalized quickly.
