Obtaining good business loan rates

Finding funding for a small business is extremely difficult due to the high-risk of start-ups. Lenders are naturally hesitant to provide you with the funding you need because you do not have collateral to front the loan or because you don't have any money from other investors. If you really want to receive a business loan with good rates, you need to demonstrate a strong ability to control your finances and have your business be in operation for at least 2 years before you apply for the loan.

To obtain good business loan rates, you need to collect the following information:

• Personal credit report and score. Lenders will review your personal financial situation to determine what type of risk you are. This is vital to receiving a business loan with good rates especially if you have a short business history. Lenders automatically assume that you will run your business finances the same way you run your personal ones so you'd better have a good credit report to back this.


• Business financial information. To get a lower interest rate, you need to provide lenders with solid financial information from the company. They need to see that you are able to manage your cash flow and they will review your balance sheet. It is also important to provide them with copies of your inventory report and profit and loss sheets. This helps lenders understand how well you are able to keep your business moving and to reduce wasted inventory. Prepare multiple financial statements in case lenders need more detail.


• Lastly, always provide lenders with a business plan. The business plan is a map for the future of the company. In your business plan you need to provide information on where you plan to be in the near and distant future. Provide lenders with information on how you plan to spend every dollar they invest and how you plan to re-pay the money you borrow. Include information about your marketing strategies and other plans that will help your business become successful. The more detail you provide in a business plan, the greater your chances will be of obtaining a business loan with lower rates.

Contact some of the lenders you have worked with in the past when you are trying to find the right lender for your loan. Banks that you have already worked with will know your track record and it is much easier for them to approve you for the loan. Using a lender you have already worked with is also easier on you because you do not need to provide all the same information to them. This makes the entire approval process faster and you can get onto running your business.

To get lower rates, find someone to be a co-signer on the loan. This person must have access to some high-value collateral and they need to have an excellent credit rating. The higher their rating, the lower your interest rate will be. The same information goes for you as well. If you have an excellent credit score, say above 780, your chances of getting a lower interest rate dramatically increase. Consider using your own home as collateral to front the loan. If you do this, you are showing the lender that you believe enough in your company to lose your own home over it. This shows dedication on your part and this will really help lenders that are back-and-forth about approving your loan.

If banks and larger financial institutions cannot provide you with the loan, look at credit unions. They are smaller and they often work with small businesses on a personal level over financial documentation.