Business owners will need to know, obtaining a small business loan can be a trying ordeal, small-business owners experienced the ups and downs in business of starting own company. A good relationship between the business owners and bankers allows for the free exchange of knowledge and the ability to meet the needs of business.

Your business needs credit to grow or a temporary infusion of cash, receiving a loan may be difficult in our still-recovering economy. There are important variables in play when banks evaluate your credit worthiness.

Documentation your Financial House in Order

A business needs to be profitable for the past three years in order to qualify for a bank loan. Since most lenders will look closely at your credit history prior to making a decision, keep an eye on your credit score and anything in your credit report that might be a red flag.

Remember, most banks will require that you personally guarantee the loan, but if you have sufficient collateral within your business to cover the loan principal, they should not require a lien on your home.

Prefer Local Banks

A national bank is less likely to hear you out if your business hasn’t been profitable for the last three years. It is also likely that your company will be passed over if you are lacking sufficient collateral to secure a loan.

“Visit a community bank and also inquire about loan programs,”  “Since up to 80 percent of a business loan can be guaranteed by the government under the SBA program, some banks may be more lenient. The downside to this route, of course, is the lengthy paperwork and delay in securing financing due to bureaucracy.”

Present more Paper Work and Collateral

Additional paperwork may be required to show the borrower’s capacity to repay the loan. Also seen an industry increase in lending that is secured by collateral, such as a loan secured by equipment or a vehicle.

“Small-business owners have survived the recession by focusing on their customers, tightening expenses, and building up their cash reserves,” Collateral may also reduce the interest rate charged because there is less risk for the bank.

Make a Relation with Banking that will Helpful for Small Business Loan

Some steps needed to set up a relationship with your banker

Set up a bank account at a bank that deals with your size and type of small business.

• Manage the account effectively and limit the overdraws, avoid bounced checks and low balances.
• Prefer short-term loan and pay within time to establish your business credit.
• Give help to your banker for understanding your business.

“ Relationships can be beneficial when it comes time to apply for a small business loan”.