3. Determine How Much Funding You Need

Credit Reports

Your credit score is a snapshot of your overall credit health, but it doesn’t tell the whole story. Small business lenders will also likely check one or more of your credit reports to see if there’s any information that could prove to be a red flag.

For example, negative credit report items like bankruptcy, foreclosure, collection accounts, and late payments could signal irresponsible credit use and make it difficult to get approved.

Cash Flow

In addition to assessing your past experience with paying off debt, lenders will also want to evaluate your financial ability to pay back the loan you’re applying for. This may include asking for a profit and loss statement, a balance sheet, and a cash flow statement.

And if your business is brand new and doesn’t have any revenue, lenders may also include your personal income and expenses.

Time in Business

Many business lenders require that you be in business for at least a year or two before they’ll even consider extending credit to your startup. So if you’ve only been at it for a few months or even a few days, your options are going to be limited.

That said, there are some business lenders who specialize in working with brand-new business owners and some alternatives that don’t look at how long you’ve been in business at all.

Your Industry

In any credit situation, the lender’s biggest priority is ensuring it gets repaid, and the industry your business is in could be one indicator of how likely you are to succeed. What’s more, lenders will want to see whether you already have experience in that same industry, or if it’s all new to you.

In general, if you’ve been in the industry for a long time, your chances of success with the new venture are higher than if it’s something you’ve never done before.


That’s because collateral, typically in the form of a physical asset, vehicle, or real estate, acts to secure the loan in case your business defaults. Instead of going after your personal assets for repayment, the lender seizes the collateral and sells it to satisfy the debt.

Collateral reduces the amount of risk a lender takes on more than a personal guarantee, so secured business loans are typically easier to get than unsecured ones.

Before you start applying for a loan, determine the loan amount you need. Calculate the expenses your business needs to cover with the loan, whether those are startup costs, the cost to hire more staff, or the expense of buying equipment for your company.

Small business owners sometimes make the mistake of borrowing more than they need, which can make it a challenge to pay back. It’s important to only borrow what you need; otherwise, you pay interest on money you didn’t need and run the risk of defaulting if you can’t afford to make your monthly payment.

4. Request Vendor Credit

Instead of looking for a business loan directly from a lender, you may be able to set up a credit arrangement with one of your vendors.

Vendor credit gives you a set period to pay what you owe instead of requiring cash on deliverymon terms include net-30, net-45 and net-60, which give you 30, 45 and 60 days from the invoice date, respectively, to pay. In some cases, you may even be able to qualify for a discount on the invoice if you pay immediately.

Benefits of Vendor Credit

Vendor credit doesn’t work as a loan, giving you an injection of cash that you pay back over time. But it can give you the flexibility you need to manage your working capital and allow you to run your business more effectively.

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