Improving Your Odds of Getting Approved
To improve your odds of getting approved for SBA financing, it’s important to learn what potential lenders are looking for and take steps to meet these expectations before you apply. When evaluating applicants, lenders typically look at the following three factors:
Personal Credit Score
There are logical reasons why a lender wants to see your personal credit history and score. If you have a good credit score, lenders are more likely to trust that you’ll make wise financial decisions for your business. A low credit score can discourage a lender from approving your loan, especially if it’s been dragged down by frequent late payments or closed accounts.
If your score is below 650 or you have some issues on your report, such as collection accounts or high credit utilization, it’s wise to fix these problems before completing an application. Most black marks eventually fall off a report, but this can take several years.
If your business doesn’t have enough cash coming in every month, you may not be able to make loan payments, and that’s a red flag for lenders. If your business is spending as much as it’s bringing in, you’ll have difficulty demonstrating how you’ll make your loan payments. Unless you have net positive cash flow each month, focus on boosting your business’s revenue without increasing expenses to improve your approval odds.
Length of Time in Business
The length of time a company has been in business matters a lot. Not all small businesses survive long-term, so showing several years of stability can assure lenders that your company has the potential to be successful in the future.
Ideally, you should wait as long as possible before applying for a loan. The longer you’ve been in business, the more likely it is that you’ll be approved. Waiting just one more year can significantly increase your approval chances, so don’t jump the gun if it’s not necessary.