Securing business financing can seem like a demanding process to small business owners as there are several aspects the borrower needs to consider prior to applying, such as what documents are needed to apply, how do they know if they qualify and what types of options are even available to them. If you are considering applying for business financing, below are some tips to help navigate you through the process of securing the best possible financing options to help address your business’ needs.
Take steps to improve your credit score: Lenders use an applicant’s personal credit score to determine how dependable they are when it comes to paying back debt. If you are unsure of your score (or you would like to check it), you can do so at no charge at various outlets including Nerdwallet or Credit Karma. It is also important to note any potential errors or issues that might hurt your eligibility (such as delinquent payments or major purchases made using a credit card). It should be noted that a higher personal credit score can oftentimes translate into more favorable interest rates, so it is important to take steps to improve your personal credit score prior to applying.
Determine how much financing is needed and what it will be used for: Lenders will need to know how much you need to borrow and what you plan to use the funds for. Are you looking to cover payroll costs, purchase new equipment, buy a new operating facility, expand product lines, or simply want to have some excess cash on hand? Regardless of the reason for taking out the funds, the main thing is to identify how much you need and when you need it by. Keep in mind that taking out a large loan may cause financial strain due to the larger periodic payback amount, but if you take out too little, that may cause a shortage in available cash for your company (as it may become difficult to qualify for additional funds later on down the road if your business’ circumstances change), hence, why it is important to determine your needs prior to applying. Identifying when you need the funds is also helpful to know because if you need funds quickly, working with sources such as Penhurst Capital can provide options within 24-48 hours; however, if there is not as much of a rush, seeking financing through a traditional bank or credit union may be the way to go for your business.
Address debt-to-income ratio: Before applying for financing, calculate your business’ debt-to-income ratio (DTI), which can be done through dividing the total amount of monthly debt payments by your business’ total monthly income. Lenders use DTI to address a borrower’s ability to manage debt and payback borrowed funds. Generally, lenders will want to see a DTI of less than one, as the general rule of thumb is that the lower the ratio, the stronger the case for approval. Lending sources will be more likely to approve the application if a borrower can show that they can pay them back.
Gather required documents: Prior to applying, it should also be noted that each lender may have different documentation requirements, so it is important to explore your options and conduct research on the individual lender’s requirements and have all required documents ready prior to submitting the application in order to ensure a timely process. Documents that are typically required include a minimum of just three months of your business’ current bank statements (although providing a full year of business bank statements can be advantageous, as that will paint the picture for the lenders of what a full year of deposit activity/business transactions look like versus only three months), along with your most recently filed corporate tax return and completion of a one page signed application form. After the application is submitted, lenders will typically provide a response within 24-48 hours.
Work with Penhurst Capital: Once you are ready to apply for financing, consider contacting Penhurst Capital. Penhurst is here to assist you in every step of the way toward securing a wide variety of financing options including term loans, merchant cash advances, lines of credit and equipment financing options, among others. Penhurst has access to an extensive network of lenders, meaning they can help you identify the most suitable lending partners for your business (and they can assist you (as mentioned earlier) in determining which documents are required for each lender in their network, ensuring you are positioned to secure the best terms possible. In working with Penhurst, you also benefit from their expertise and connections, helping you get faster access to capital, flexible repayment terms, and tailored loan solutions that fit your business’s unique needs.
