Loan Requirements

The time has come to expand your business with new employees, a larger location or a new product line. It’s an exciting time, but stressful because you’re not sure you have the cash reserves to manage the expansion.

For many small businesses, this situation calls for a small business loan – a cash infusion that pays for itself, plus the interest, with the new opportunities and extra income it allows you to create.

Many of our Kabbage customers are new to small business lending. Though they’re familiar with personal loans, they only know the basics of small business loans and lines of credit. For those who “resemble that remark” – and for more experienced folks who would like a review – here is your expert-researched, Kabbage curated list of the top five requirements to get the best possible small business loan.

#1: Have Solid Credit

The bad news about small business lending is it can be hard to qualify for the best rates and deals. The good news is this decade has more options for good small business loans than any other time in history. You can choose between platform lending (like Kabbage), traditional loans (like from a bank) and a variety of hybrid options available from local vendors or via the internet.

This flexibility doesn’t mean your company shouldn’t look as good as possible on paper. Your FICO credit score will figure heavily in any lending decision, so (if time permits) spend time grooming that number in the months prior to applying. Research what other metrics the lenders you want use, and groom them as much as possible, too.

If you have a major ding in your credit, like a repossession or string of late payments, be prepared to discuss them and why things will go better in the future.

#2: Have a Solid Business Plan

You should have one of these anyway, since a strong business plan is a prerequisite for stellar business success. Traditional lenders will expect to see an updated, professionally prepared business plan as part of the lending process. Lacking one tells them you’re not ready for the “big leagues” and are a bad credit list.

Though platform lenders like Kabbage won’t insist on seeing your formal business plan, similar documents about your social presence, industry statistics and unique market advantages – all of which are part of a comprehensive business plan – will go into decisions about what to lend you and how much it will cost.

Either way, get a business plan together.

#3: A Strong and Compelling Personal Resume

Traditional lenders want proof that the people responsible for running a business are qualified to do so, and part of that proof will be seeing the resumes for you and other principles like owners and executive officers. This resume should be as solid, well-edited and up-to-date as any resume you’ve ever sent out.

Consider: the purpose of a resume is to get you the job you want. The purpose of this resume is to get you the job of running the company you want, instead of the company you have.

Platform lenders don’t look at your traditional resume, but they will look at your business’ curriculum vitae in terms of performance metrics and social sharing. Take time to groom those items as substantially as you would a regular resume.

#4: Bulletproof P&L Statements

Like your business plan, you should have these anyway. You should be using your Profit & Loss statements as part of a robust monthly “vital signs” check for your business. If you’re not doing them, dig into your accounting software for half an hour. You’ll find a tool that compiles P&Ls from your records. If you’re not using software to keep track of your financials…get started on doing that.

Lenders of all stripes are looking for three things in your P&L: reliability, professionalism and ethicality.

• Reliability – They want evidence that you will be able to make your promised payments, based on enough cash flow to cover the loan. If you don’t, the lender will assume that lending you money is too high a risk.
• Professionalism – Lenders presented with incomplete, inaccurate or hastily prepared P&L statements will assume that your business is similarly disorganized.
• Ethicality – If you “fudge” your numbers to look better and get caught, you are done with that lender. The decision makers will assume that you cut ethical corners in other places.

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