America is peppered with an incredible 28 million small businesses, those defined by their employment of fewer than 500 people. They vary dramatically in many ways, but many do share one major similarity: financial challenges. In 2012, 38% of small businesses who took out loans did so just to maintain inventory, and 63% were simply needing help with cash flow.
Many businesses in need of small short term loans often choose cash advances, which are alternatives to traditional loans. Others, however, are less inclined to use cash advances and instead pursue short term small business loans through the SBA, banks, or alternative lenders. The process of receiving short term loans for businesses can be daunting. That’s why we’ve compiled this list of steps for getting short term small business loans when you need them.
- Develop a business plan. This serves as the proof that customers would buy your product or service — at a high enough price for your business to make a profit. Lenders are primarily looking at your cash flow, collateral, and viability of your business.
- Show that you care. If you don’t want to make a personal investment in your business, why would somebody else? Show your commitment by making a personal financial investment into your project.
- Forecast success. Demonstrate that you can produce a good profit by creating realistic short-term, medium-term, and long-term financial projections. By creating these benchmarks for short term small business loans, you demonstrate the responsibility and financial savvy needed to succeed in obtaining a loan. Just make sure that you haven’t underestimated your financial needs and that you haven’t forgotten about seasonal highs and lows.
- Prove that you can compete. Include details in your business plan about how your product or service gives you a competitive edge over similar businesses.
- Look for industry favorites. You have a better chance of obtaining a short term small business loans if you approach lending institutions who have familiarity with your industry and target market. Get in touch with your local chamber of commerce to find out which institutions are recommended for your business.
- Be ready to talk. When the time comes for your loan interview, be prepared with facts to support your application claims. Have a positive, professional demeanor and know your plan inside and out. Try to sell three things: yourself, your confidence in your business plan, and your creditworthiness.
It can be challenging to obtain short term small business loans, especially for business owners without much of a proven track record. If you are careful to apply these tips, however, you’ll put yourself in a better position to succeed.