DO YOU NEED A BUSINESS LOAN?

If your business can use a shot of cash to help it grow, fund a move or to get through its slowest season, a business loan can be the right answer.

Here’s what you need to know about applying for a business loan:

Check Your Credit

Before you apply, it is crucial to assess the health of both your personal and business credit. Your personal credit score ranges from 300 to 850, with scores between 580 and 669 considered fair, 670 to 739 considered good, 740 to 799 considered very good, and 800 to 850 considered exceptional. In general, the higher your score, the easier it will be for you to qualify for a loan and secure a lower interest rate.

Business credit scores are measured differently. Experian utilizes the Intelliscore Plus credit scoring model, which assigns scores ranging from 1 to 100. Equifax, on the other hand, assigns payment index scores ranging from 0 to 100, credit risk scores ranging from 100 to 992 and business failure scores ranging from 1,000 to 1,880. The D&B score, provided by the Dun & Bradstreet Corp., ranges from 0 to 100. Finally, the FICO Small Business Scoring Service score ranges from 0 to 300.

If your personal and/or business credit scores are low, it is advisable to work on improving your credit before applying for a loan. You can achieve this by making timely or early bill payments, reducing debt and carefully reviewing your monthly credit statements for any erroneous charges.

Update Your Business Plan Most lenders will require a current business plan before approving a loan. Therefore, it is crucial to review and update your business plan to ensure it is ready for presentation to a potential lender. Your plan should include detailed information about how your company intends to utilize the funds. Make sure to create a comprehensive business plan that outlines how your company plans to use the funds, the anticipated increase in revenue and the repayment strategy for the loan.

Organize Your Personal and Business Documents When applying for a business loan, you will need to gather and organize the following documents and identifying paperwork:

• Photo ID.
• Accurate monthly financial statements from the past two years.
• Business license.
• Any commercial leases.
• Business insurance plans.
• Payroll records.
• Incorporation documents.
• Current financial obligations.
• Three months of bank statements.
• Personal and business tax returns.
• Collateral.

Research Potential Lenders Applying for a business loan is a significant decision that requires careful consideration. Take the time to thoroughly research potential lenders, ensuring that you review each lender’s eligibility criteria, the average size of loans they offer and their current average interest rate, among other factors.

Consider applying for a business loan through a credit union as they often offer personalized service, simpler qualifying criteria and competitive interest rates. Submit Your Application Once you have completed the necessary preparations, it is time to submit your loan application. With a bit of luck, you will soon secure the funds necessary to take your business to the next level.

Charles Aoki is a commercial loan officer with Wasatch Peaks Credit Union, headquartered in Ogden.