Loan underwriting is the process lenders use to determine the risk that a borrower will not repay a loan. A higher risk of non-payment means higher interest rates or denial.
Business Loan Underwriting is a Little Different
When it comes to business loan underwriting, underwriters are looking at the owner’s information as well as information related to the business itself. This is more complicated and usually takes longer.
Here are some common questions about the process, and some tips to make things go as smoothly as possible.
Question #1: What Are Underwriters Looking For?
Loan underwriting is not a game of “gotcha. “ Lenders want to make good loans. After all, that’s how they make a profit. They need to see not only that your business can repay the loan, but that there is a high probability you will repay the loan. They also want to see how you will handle repayment if something unexpected happens. Do you have a plan for making payments if things don’t go as planned?
Underwriters are asking themselves these questions when they review your application. If you know what they’re looking for, you can include all the information needed on the front end.
Each lender has different criteria when it comes to underwriting small business loans. There really isn’t a standard that applies to every lender. Still, generally lenders are looking at the same types of things when they look at your business. But be aware, they may not weigh all factors the same.
How to Answer Question #1 Most Effectively
Provide all requested information.
Have financials professionally prepared by an accountant and reviewed by a tax attorney.
Fill out the application thoroughly and carefully.
Question #2: What Will I Need to Provide to the Underwriter?
Generally, loan underwriting requires you to provide:
Basic personal information, such as your name, address, and Social Security number
Your business name or doing business as (DBA) name
Your Employer Identification Number (EIN)
A copy of your business plan
Information about collateral if you’re applying for a secured loan
Details about your business, including time in business, annual revenues, number of employees, and more
Financial records, including tax returns, bank statements, and/or pay stubs (both personal and business)
How to Answer Question #2 Most Effectively
Write your business plan long before you apply for a loan. Have a mentor or the local Small Business Development Center help you. Also, gather records requested and review the details for accuracy.
Question #3: How Will the Underwriter Use the Data I Provide?
The data you provide for loan underwriting will be used to do the following.
Verify Business Revenue
If there isn’t enough revenue to support debt payments, you aren’t getting the loan. Most lenders have a ratio that helps them calculate how much they are willing to lend to your business. That is, if they approve the application.
Generally, approval for any amount over 10% of your annual revenues is not likely. This is especially true for traditional lenders. Of course, it depends heavily on whether you have any other business debt.
With traditional lenders, your personal credit score is going to be part of every loan decision. In fact, in some cases it will determine whether or not they will pursue your loan application at all.
Banks generally look for scores in the 700s, though some will go as low as 680. The SBA has a minimum threshold around 650. In contrast, online lenders will go as low as 600 or even 500 in some cases.
If you get approval, the lower your personal credit score, the more expensive the financing. You may also have to provide a personal guarantee or sign off on a UCC blanket lien if your personal credit scores are particularly low.
Verify Collateral
Not all lenders require collateral, but most banks and the SBA do. While the SBA doesn’t always require that you fully collateralize a loan, they will require any collateral you may have available.
Online lenders will often apply a general lien on business assets. Also, most will require a personal guarantee on small business loans.
Determine Personal Equity in the Business
Underwriters may want to see how much money you have invested in the business. Lenders want you to have some personal skin in the game. If the business defaults, you have something to lose too.
In addition, lenders may use the data to determine a number of ratios that can help them in the decision making process.
Debt Service Coverage Ratio
This is a calculation of your business’ income and the total amount of business financing you already have. It is calculated as Business Income/ Business Debt. If your ratio is below 1.25, it will be difficult to get more financing.
Debt-to-asset Ratio (total debt/ total assets)
This is especially important to underwriting if there isn’t a collateral requirement. It shows whether you have enough assets to cover the loan in the event you default. For example, do you have enough equipment or property to liquidate and cover the loan if you can’t make payments. A ratio of more than 1:1 is favorable.
Loan-to-value Ratio
This only applies if there is a collateral requirement. Lenders really want to see that your collateral is worth at least 20% more than you want to borrow. That’s why you need a down payment of around 20% to buy a new car or purchase a new house. The lender wants to make sure you meet this ratio.
How to Answer Question #3 Most Effectively
Since you now know the formulas often used in the loan underwriting process, you can have your accountant do the math. It doesn’t make any sense to apply if the numbers aren’t in your favor. If you are close, it may be worth a shot.
Running the numbers can also give you an idea of what may be required in terms of a personal guarantee or collateral. This is helpful information to have before you apply.
Question #4: What Are the Dealbreakers?
There are a number of issues that an underwriter may uncover that may can mean “end game” for your loan application. If you know of any of these issues before you apply, definitely disclose them. Knowing ahead of time will allow the underwriters to take note of mitigating factors as they go. If they come across any of these on their own, it is probably game over.
Recent business cash advances or loans that are discovered but not disclosed in the month to date bank activity
An excessive amount of negative days in the bank activity printout
A criminal background history
Undisclosed tax liens or those not in a payment plan
A recent bankruptcy (within the last 6 months) or any open bankruptcy
Unsatisfied excessive or large judgments
Less than 50% ownership (depending on the lender)
A major drop in revenue
Negative landlord references
An undisclosed default or a restructured business loan or cash advance
How to Answer Question #4 Most Effectively
Check the documents you’re providing and make sure they’re complete. Material omissions, such as new loans that are not yet on record, need to be disclosed.
That way, the loan manager has all of the information and won’t penalize you for omissions.
Data Drives Loan Decisions
You provide the data to lenders that the underwriters use to make the loan decisions. It is imperative that the data you provide is as complete and accurate as possible. If they find inconsistencies, it is very likely they will simply deny the loan.
Something as small as using an ampersand in your business name in one place, and the word “and” in another, can cause enough doubt to deny a loan.
This is why building fundability is so important. Underwriters want to see your business is established as a separate entity from you, the owner. They need to see accurate and consistent information. Consequently, providing this from the beginning will make their job easier and save you a lot of time and frustration.
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There’s a constant war between growing a business and keeping an operation lean, mean, and agile.
How does a company stay efficient, even as they are trying new things and bringing on employees?
It’s actually quite simple: business process management (BPM) software. Rarely are answers this easy.
BPM software helps organizations of all sizes streamline operations and minimize waste.
Visualize every process from end to end. Find opportunities for efficiency and automation. Get more done with fewer mistakes.
If optimizing your business processes sounds like a good idea, this post will tell you everything you need to know about how to find the perfect BPM software for you.
The Top 5 Options for Business Process Management Software
How to Choose the Best Business Process Management Software for You
These tools are supposed to make life easier, right?
Yes. 100 percent.
And not just you, but your employees, customers, and potential clients, too.
Any organization can benefit from implementing BPM software. Because of their broad usefulness, these products come in a lot of shapes and sizes.
Thankfully, you can break your search down into three essential goals.
You are looking for BPM software that will help you:
Clearly visualize business processes
Automate more business processes
Monitor and improve business processes
Design. Run. Automate. Improve. Repeat.
Once you get set up, it will be that simple.
Figure out which features you need by considering each product in light of how it will help you visualize, automate, and monitor the daily work of your business.
Process Visualization
The first responsibility of BPM software is to help companies define and document their business processes.
These platforms have a visual workflow builder that lets you map out every step of every process from start to finish.
Missing steps and redundancies are plain as day. If there’s a breakdown in the billing process, for example, it will be easy to understand and address with BPM software. There’s a clear picture of how the paperwork is moving (or not) from start to finish.
This is way better than finding out there’s an issue from a confused or angry customer. By providing a full, end-to-end visualization of the process, BPM software is really helpful for diagnosing and treating common symptoms of business inefficiency.
What’s really nice is that you can quickly modify workflows without writing code.
Check out the drag-and-drop workflow builder in Orchestly, where you can see how each stage and transition can be easily defined:
Each product does it a little differently. It’s a good idea to watch their videos to see what the UI is like. This will give you a base-level sense of how each BPM software thinks about process management.
If you are a fan of the flow chart style, Orchestly is going to work well. Tallyfy wants to get away from flow charts and works off what they call a blueprint. Pipefy is designed to work best in board-based and Kanban settings.
Which one looks like it’s swimming in your current?
Process Automation
As elegant and useful as the visualization aspects of BPM software are, the process automation is where you’re going to see the major impact on your operations.
With workflows represented in a clear fashion, you can identify different points and transitions where you can add automation.
In the Pipefy workflow builder, for example, you can make it so one action triggers another. There’s no code to write, just select the option that pushes the workflow along.
This can take an incredible amount of busywork out of people’s day-to-day. A sales rep completes their proposal and it’s automatically routed to the right manager for review and approval.
Not only is that rep moving on to their next task, the pending approval is queued up exactly where it needs to be for the manager.
Nothing gets missed or held up.
BPM software is great at automating routine and recurring processes like:
Requests for approval
Inventory updates
Time-off requests
Promotions
Customer onboarding
Training new hires
There’s really no limit to the applications. You can implement uniform policies, keep everyone informed, and ensure that every last lowercase j is dotted.
With regards to automation, you want to choose BPM software that strikes an appropriate balance in your workspace. Something sophisticated enough to handle the job that is still within your IT wheelhouse.
The big edge that the code-heavy platforms have is that they can be 100% customized to fit your situation.
The upshot to the no-code platforms is that non-technical users are going to be up and running in no time. They won’t need help to build out and adjust workflows. This kind of independence is really important, and shouldn’t be sacrificed lightly in favor of a more comprehensive tool.
Process Monitoring
What if you never had to send another “Hey, how’s it going?” email?
With BPM software, you can monitor your processes in real-time without ever having to bug someone again. No one does.
Users see exactly where they are on all their tasks. Dates and deadlines are clear, and everything they need to do is laid out in front of them.
Supervisors have total visibility of all projects and jobs. With workflows feeding information into dashboards, managers have a clear view of KPIs and bottlenecks can be seen—and avoided—well in advance.
Leadership can leverage your BPM platform to track tons of useful data for measuring productivity, forecasting costs, and further refining processes.
Another nice feature of good BPM software are the collaborative tools that help teams stay on track.
These aren’t monitoring tools per se, but the ability to comment, @mention, or flag tasks may serve as a critical early warning system.
The Different Types of Business Process Management Software
BPM Software can do a whole lot on its own or it can act as a guide.The type of BPM software you need depends on your goals—visualization, monitoring, and automation—and how complex your desired workflows are.
In some ways, you can think of these four different types of BPM software as a stack that grows increasingly robust:
Let’s go in-depth on each type to build a firm sense of how these capabilities help companies respond to different challenges.
Business Process Modeling Software
When you see business process modeling software, think of it as a BPM solution that helps with the visualization side of process management.
These tools produce clear documentation, SOPs, and visual representations of workflows that can easily be shared throughout the company.
This is crucial for maintaining consistency of business operations and a boon to new hires who can understand exactly where they fit in.
Workflow Management Software
The next step up in functionality is workflow management software. With this type of BPM software, individuals and teams can interact with the workflows.
They can mark assignments as done, ask questions about specific tasks, and get all the information they need in one centralized location.
Workflow management solutions have a blend of visualization and monitoring capabilities that are really great for keeping everyone on track.
Workflow Automation Software
BPM software that fits in this category will let you automate repetitive tasks within workflows. Set rules that automatically route tasks, files, data to the right person or team.
Say a customer fills out a form, for instance. This could trigger a welcome email series and automatically route their contact info to the appropriate rep.
That’s a simple example, and you can set rules that automate as many steps as you like throughout the customer lifecycle.
These tools tend to connect to a variety of data sources and work well across the organization. Often they come with pre-built workflows and templates for HR, accounting, sales, and so on.
Scope out the solutions on the vendor website to see examples of who’s having success with each product. Are these markets and use-cases that apply to your business?
In terms of automation capabilities, the simpler, lighter workflow automation tools can do a lot. The more expensive premium tools can do a lot more.
I know that’s an oversimplification, but in the end, the “power” of BPM software lies in how well a team can use it. The heavyweight automation features included with premium products are amazing, no doubt, but they take some time to master.
Low-Code Application Development
Low-code application development platforms weren’t built for BPM, but they are growing in popularity as a solution.
Low-code application development platforms allow novice developers the ability to whip up custom applications that meet unique business needs. Really, anyone who puts the time in can figure out how to use these intuitive platforms with little to no coding.
Why is this important for BPM?.
The thing is, at a certain point, super-complex workflows can get unmanageable. There’s no one straw that breaks the camel’s back, but if your average user is having to reach out to IT to sort out problems with their daily work, there’s probably an issue.
Low-code application development comes at the problem from a different angle. Instead of deploying a system and trying to fit it to your needs, why not build a system that’s specific to your organization?
These tools connect with third-party SaaS apps, so you can build out really rich workflows that leverage information from the tools you already use.
It’s a different approach to the same problem as traditional BPM software. If your teams are comfortable with a low-code solution, I’d go for it. They’re really affordable and have few hard limits in terms of what you can do.
#1 – Orchestly — Best for Simple Workflow Automation
Orchestly is built to optimize your everyday business processes.
Say you want to hire a new worker, file an expense report, or request new content. Maybe the marketing department wants a killer post about the best business process management software.
In each case, there are several steps of validation and review that need to be baked into each process. With Orchestly’s visual workflow editor, literally anyone can build out the exact steps required.
Here’s an example of an onboarding workflow in Orchestly.
Each step in the series of tasks is clearly defined in a series of stages (white boxes), connected by transitions (turquoise boxes), and parallel transitions (orange boxes). Drill down into each stage to the set of conditions that need to be followed before, during, and after any transition.
This is a super easy interface to master.
There are tons of pre-built templates and, once users want to fine-tune their own scenarios, all of the visualization and basic automation is managed with an intuitive drag-and-drop editor.
Another really nice thing about Orchestly are the monitoring features. There are a host of ready-made report types that give you deep insight into your processes.
You can drill down into transitions to discover how many requests are at a particular stage, the ratio of approvals to rejections, and other metrics. Plus, you can filter search results to get a real time picture of specific employees, projects, or customers.
Orchestly comes with other features that help you extend BPM functionality throughout your organization:
Role-based access control
Request manager
Form designer
Audit log
Email templates
APIs, extensions, and webhooks
Orchestly offers a free version that is limited to five users and three orchestrations (their word for workflow). The paid version, Orchestly Business, is $7/month per user with an annual subscription.
You can try Orchestly Business free for 15 days. If you have never given BPM software a shot, this is a great, low-risk option to start out.
#2 – Pipefy — Best BPM Software for Kanban
Pipefy is winning over a lot of people because of its approachable style. For companies that are already managing processes within a Kanban framework, Pipefy is going to fit like a missing puzzle piece.
This platform has the feel and flexibility of an agile project management tool, yet you’ve got the power of BPM software.
Switch between calendar, list, and Kanban views. Yes it looks like Trello, but in Pipefy you can use the drag-and-drop editor to add rules, custom fields, and ensure that everyone assigned to the process knows exactly what’s necessary to keep things moving.
Build out completely custom workflows with Pipefy’s easy editor. There are hundreds of plug-and-play process templates available in its free gallery.
What’s really helpful for marketing and sales is that you can design these workflows to kick off as soon as someone fills out a form, or reaches out by phone, email or SMS.
They’ve really made it as easy as possible for people to configure their workflows without writing a line of code.
Intuitive doesn’t even begin to describe how helpful Pipefy is for first-time users. It’s always suggesting the next step.
Plus, your customers and clients can create and track requests without being a Pipefy user, which is great for collaboration with clients and other stakeholders.
Other helpful features include:
Reporting dashboards
Native integration with Slack and GitHub
API access
Self-service portals and forms
SLA and deadline tracking
Pipefy offers a free trial of their paid plans and a free version for up to five people. To really take advantage of this awesome tool, I recommend one of the paid plans:
Business: $18/month per user
Enterprise: $30/month per user
Unlimited: contact sales
If you like the idea of moving cards through a pipeline, this is a great product. You can start small and gradually automate every one of your processes with Pipefy.
Easy to build, easy to adjust, Pipefy is perfect for the continuously improving agile workflow. If your teams are happy running Kanban, look no further than Pipefy.
#3 – Creatio Studio — Best Low-Code Solution
Creatio Studio gives you the best of both worlds in terms of power and learning curve. Non-technical users will find the platform just about as easy to use as any popular BPM software, but there’s no ceiling to what they can do if they are willing to learn.
The free version of Creatio Studio works for business process modeling, allowing teams to diagram workflows in a collaborative setting. View, comment, and edit the designs in real time, and save everything to a process library for easy access.
To manage, monitor, and automate processes, you’ll need the Creatio Studio Enterprise. With it, you can design workflows and business applications of any complexity.
Think of building with blocks rather than writing code. Creatio compares it to building with LEGO—you don’t have to make the parts so much as select what you want and snap it together.
There are hundreds of ready-to-use templates in the Creatio marketplace to help you get started. As you design and refine processes within the visual design builder, Creatio automatically generates the corresponding business logic.
It’s a great product that straddles the divide between technical and non-technical users. Creatio is constantly suggesting actions and helping users double-check their work.
In addition to helping people design exactly what they need, Creatio Studio comes with:
Role-based access control
Interactive dashboards
API access
No-code data migration
One-click pdf documentation
AI and machine learning tools
Creatio Studio is free for an unlimited number of users and Creatio Studio Enterprise starts at $25/month per user.
Shortlist the free version of Creatio if you are just starting to think about business process management. It will help you get off on the right foot at no cost.
If, on the other hand, you are hitting the limits of your current BPM software, Creatio Studio Enterprise is one of the most capable, affordable options available.
Although many low-code platforms are built for general use, Creatio was originally founded as bpm’online in 2011. Every aspect of the design has BPM in mind, which lowers the learning curve tremendously for non-IT users.
#4 – Tallyfy — Best for Automating Recurring Processes
Tallyfy gets away from the idea of flowcharts. Instead of shapes and arrows to guide your design process, Tallyfy keeps everything in something they call a blueprint.
There are pre-made blueprints you can use for marketing, finance, sales, HR, and more. Once you have designed a blueprint, you can use it over and over again.
In the example below, you can see a blueprint that captures the entire onboarding journey.
Blueprints are easy to customize without code. Point and click to add new tasks to blueprints. Within tasks, you can set required fields and add drop down menus that will pull the names of employees, customers, and projects from connected databases.
When you go to launch these blueprints, end-users love how easy it is to complete each task.
Managers can view progress at a glance or drill down into specific tasks. Clients who need to approve a request or sign off at a particular step will just see that.
Working off blueprints, it’s incredibly easy to set up and automate recurring processes. Quickly create a library of blueprints that suit your needs, and continuously improve each step. Turn all of your recurring processes into error-free workflows that save time and eliminate stress.
After launching your automated processes, Tallyfy’s process monitoring capabilities help you keep track of all your flows in real time. Some of the highlights include:
Powerful search and filtering
Custom process views
Role-based access control
Audit trails
Commenting
Issue flagging
Having commenting and issue flagging as separate features is so important for surfacing problems quickly.
How many times does a red alert get buried for a few hours among the constant flow of @mentions and comments? With easy opportunities to flag problems, companies never let an employee, client, or goal fall through the cracks again.
You get two months of Tallyfy free if you sign an annual contract for any of their three pricing tiers:
Tallyfy Docs: starting at $42/month, includes 10 members
Tallyfy Basic: starting at $100/month, includes 8 members
Tallyfy Pro: starting at $100/month, includes 4 members
The way their tiers break down is really easy, though it looks a little unusual at first. Docs lets you create read-only blueprints, Basic lets you launch blueprints as a process, and Pro lets you add automation.
If you need additional users, the added cost increases at each tier, from $4/user with Docs, to $12.50 with Basic, and $25 with Pro.
They offer a free 14-day trial, if you want to see what Tallyfy is all about. I really recommend the blueprint-style BPM software to any business that has repetitive tasks they need to get right every time.
#5 – Zoho Creator — Best for Customizable Workflows
Zoho Creator is a low-code application development platform that can be used to create a wide range of customizable business process workflows.
Unlike Creatio Studio, Zoho Creator wasn’t born as a BPM tool. Think of it as a blank slate with an intuitive toolkit that allows companies to create everything from serverless apps to full-blown, totally specialized ERP software.
The reason companies are finding success with Zoho Creator in the BPM space is that it comes loaded with tools to build out customized workflows.
Between the templates and the drag-and-drop platform, everyone with a few weeks of Zoho Creator under their belt will think they’re a developer.
There’s nothing dazzling about the UI, but it’s easily navigable and you can build out really sophisticated apps to automate your business processes.
Zoho is really great at guiding users through each step, whether they are trying to set up a simple payment process, or design a mobile app for their office.
To really handle the complex tasks, users will have to familiarize themselves with Zoho’s proprietary language, Deluge, which is short for Data Enriched Language for the Universal Grid Environment.
It’s a mouthful to say, but in terms of building out custom scripts quickly, Deluge is a huge step in the right direction.An HR manager with no code experience will be able to automate a recruitment application. A sales rep can build a system to track leads automatically using Deluge.
With other platforms, end-users are at the mercy of their automated workflows and have little ability to make changes to the system. With Zoho, they can keep control and ensure that their workflows are designed according to best practices and current challenges.
For their part, technically gifted users will love Zoho Creator because they can add logic and function to their applications without having to wrestle with conventional tools.
Some of the other features that help you get off the ground quickly include:
50 ready-to-use apps
Schema builder
Developer sandbox
Payment gateway integration
Audit trail
Automated application backup
Pricing is remarkable, considering how powerful the platform is.
Basic: $10/month per user
Premium: $20/month per user
Ultimate: $35/month per user
The Basic tier is quite robust, though you are limited to building 3 apps. You get more apps and greater functionality at the Premium and Ultimate tiers.
You can certainly manage simple workflows with Zoho Creator, but I wouldn’t make this your first pick for that reason. It’s just too powerful to justify using when you have Orchestly and Pipefy available.
Choose Zoho Creator if lighter tools aren’t meeting your BPM needs.
Summary
There is no reason to fly blind. Get immediate insight and oversight of all your business processes with an appropriate BPM solution.
If you are just starting out, I really recommend Orchestly for and Tallyfy.
If you have simple automation and workflow goals, go with Orchestly and see how far it gets you. For many companies, it’s going to be enough to better manage all of their operations.
Tallyfy is going to knock out repetitive tasks really quickly with the workflow automation tools. Blueprint your processes and then manage them with little oversight.
For agile teams, especially those working within a Kanban or Scrum process framework, I would definitely check out Pipefy. It’s built for agility. Make adjustments on the fly and monitor performance to continually evolve better processes.
Between Creatio Studio and Zoho Creator, the two low-code options on this list of best BPM software, the choice ultimately comes down to what your users like.
Judging from reviews, lots of new users are falling in love with Zoho’s Deluge scripting language. If that’s the case, you may want to consider implementing Creator and other products from Zoho, like their CRM, which also rely on Deluge.
If someone is looking for a more traditional take on highly-customizable BPM software, I’d point you to Creatio Studio.
Do you know how to get a business loan? It’s a broad topic. Probably more so than you realize. I mean, what kind of loan do you need? What type of lender will you use? Do you even qualify for a business loan? Are there other options? Can you afford a business loan? Then, these days, there is the question of whether you qualify for any of the COVID-19 relief loans.
Do You Know How to Get a Business Loan? Here Are 5 Things you Can Do to Make it Easier
These are all questions that you need answer to before you can even think about how to get a business loan. That’s because those answers affect the process. However, there are a few things that, across the board, can make getting a business loan easier.
1. How to Get a Business Loan: Evaluate Your Fundability
When most people start thinking about how to get a business loan, they think about credit. Sometimes they even wonder about business credit, but they usually have the wrong idea about that. What they are really wondering is, is their business fundable? Fundability itself is often misunderstood, being confused with credit.
Check out our best webinar with its trustworthy list of seven vendors to help you build business credit.
First, it has to do with much more than credit, either business or personal. Fundability includes such things as how your business is set up, what information is out there that connects you to your business, and other factors that you have probably never thought about in relation to getting a business loan.
Fundability is essential in how to get a business loan. The following things all affect the fundability of your business. Take some time to consider each of them and the effect each may have on your ability to get a loan. Basically, you need to do an analysis of fundability for your business. Doing so will help you get things in order so that it will be easier to get a business loan.
Consider Your Business Credit
No brainer, right? Business credit definitely comes into play. But, where do business credit reports come from? There are a lot of different places, but the main ones are Dun & Bradstreet, Experian, Equifax, and FICO SBSS. Since you have no way of knowing which one your lender will choose, you need to make sure all of these reports are up to date and accurate.
What Data is Coming Out of Other Business Data Agencies
In addition to the business credit reporting agencies that directly calculate and issue credit reports, there are other business data agencies that affect those reports indirectly. Two examples of this are LexisNexis and The Small Business Finance Exchange. You cannot see your reports from these agencies, and you cannot change the data they already have on you or your business. What you can do, however, is ensure that any new information they collect is positive.
Identification Numbers
Dun & Bradstreet is the largest and most commonly used business credit reporting agency. Every credit file in their database has a D-U-N-S number. To get a D-U-N-S number, you have to apply for one through the D&B website. You must have this number to have a file with D&B, and you have to have a file with D&B to build business credit.
Business Information
It may seem obvious that all of your business information should be the same across the board. However, when you start changing things up, like adding a business phone number and address or incorporating, some things may slip through the cracks. Make sure all your information is updated everywhere. Check licenses, insurances, deeds, and anything else you can think of for consistency in name and contact information. Then, be sure the same information is on your loan application.
Financial Statements
Both your personal and business tax returns need to be in order. Also, you need to be actually paying both.
Bureaus
There are several other agencies that hold information related to your personal finances. For example, ChexSystemsissues reports that can affect fundability. These reports, in the simplest terms, detail bad check activity. This affects your bank score. If you have too many bad checks, you will not be able to open a bank account. As you can imagine that is a big problem when it comes to fundability.
Personal Credit History
Your personal credit score from Experian, Equifax, and Transunion all affect the overall fundability of your business. If it isn’t great right now, get to work on it. The number one way to get a strong personal credit score or improve a weak one is to make payments on time, consistently.
The Application Process
Next, make sure that your business name, business address, and ownership status are all verifiable. Lenders will check. Then, make sure you choose the right lending product for your business and your needs.
2. Make Sure You are Set Up Properly
How your business is set up also makes a difference in how to get a business loan. For one, if your business isn’t set up as a separate entity from you as the owner, your ability to get a loan will rest solely on your personal credit. You don’t want that. When you separate your business from yourself, your personal credit will still matter, but it won’t be the only thing that matters. Here is how to make sure your business set up separate from you.
Get Your Business Its Own Contact Information
Your business needs its own phone number, fax number, and address. You can easily get a business phone number and fax number that works over the internet instead of phone lines.
In addition, you can use a virtual office for a business address. There are businesses that offer a physical address for a fee. Sometimes they even offer mail service and live receptionist options. In addition, there are some that offer meeting spaces for those times you may need to meet a client or customer in person.
Get an EIN
The next thing you need to do is get an EIN for your business. This is an identifying number for your business that works in a way similar to how your SSN works for you personally. You can get one for free from the IRS.
You Have to Incorporate
Incorporating your business as an LLC, S-corp, or corporation is necessary for separation. It also lends helps your business be seen as legitimate. In addition, it offers some protection from liability.
Business Bank Account
You have to open a separate, dedicated business bank account. There are a few reasons for this. First, it will help you keep track of business finances. It will also help you keep them separate from personal finances for tax purposes. Additionally, there are several types of funding you cannot get without a business bank account.
Licenses
For a business to be legitimate it has to have all of the necessary licenses it needs to run. If it doesn’t, that is a huge warning to lenders.
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Website
I am sure you are wondering how a business website can affect your ability to get funding. Having a poorly put together website can be even worse than not having one at all. It is the first impression you make, and if it appears to be unprofessional, it won’t look good.
Spend the time and money necessary to ensure your website is professionally designed and works well. Pay for hosting too. Don’t use a free hosting service. Along these same lines, your business needs a dedicated business email address. Make sure it has the same URL as your Website. Don’t use a free service such as Yahoo or Gmail.
3. Build Business Credit Now
How do you build business credit? Well, after your business is set up to be separate from you, the owner, you have to get accounts reporting payments to the business credit reporting agencies.
There are a few ways to do this. The easiest way is to ask those merchants you already work with if they will extend credit and report payments.
Another option is to ask those that you already pay each month to report your payments to the business credit reporting agencies (CRAs). This would be things like utility payments, internet, or rent.
The last option is what we call starter vendors. These are vendors that will offer net terms on invoices without a credit check, and then report those payments to the business CRAs.
Once you have several of these initial accounts reporting positive payment history for a few months, you can start to apply for cards that will check your business credit. Start with store cards like Office Depot or Best Buy. Then, when you get a few of those, move on to fleet cards from companies like Shell and Fuelman. After that, you can apply for standard business credit cards that are not limited to where you can use them or what you can use them for, and you can get approval based on your business credit. As you make on time payments, your business credit score will continue to get stronger.
4. Research Lenders and Products
There are many types of loans and lenders. You need to know which ones will work best for you and your situation. Applying for the right product for your business from the right lender will go a long way toward approval.
Traditional Term Loans
These are the loans that you go to the bank to get. As a business, your business credit score can help you get some types of funding even if your personal score isn’t awesome. That isn’t necessarily the case with this type of funding however.
With a traditional lender term loan, you are almost always going to have to give a personal guarantee. This means they will check your personal credit. If your personal credit score isn’t in order, you will likely not get approval.
What kind of personal credit score do you need to have in order to qualify for a traditional term loan? If you have at least a 750 you are in pretty good shape. Sometimes you can get approval with a score of 700+, but the terms will not be as favorable.
If you have really great business credit, your lender might be more inclined to be a little more flexible. However, your personal credit score will still weigh heavily on the terms and interest rate.
SBA Loans
These are traditional bank loans, but they have a guarantee from the federal government. The Small Business Administration, or SBA, works with lenders to offer small businesses funding solutions that they may not be able to get based on their own credit history. Because of the government guarantee, lenders are able to relax a little on the personal credit score requirements.
In fact, it is possible to get an SBA microloan with a personal credit score between 620 and 640. These are very small loans, up to $50,000. They may require personal collateral as well.
The trade-off with SBA loans is that the application progress is lengthy. There is a ton of red tape connected with these types of loans.
Check out our best webinar with its trustworthy list of seven vendors to help you build business credit.
Business Line of Credit
This is basically the traditional lender’s version of a business credit card. However, rates are typically much better than a credit card. The application and approval process is similar to that of a traditional term loan.
Non-Traditional Lenders
These are lenders other than traditional banks and credit unions that offer terms loans. The difference between these and traditional lenders is that the loans have looser approval requirements and a much faster application process. Typically, you can simply apply online, get approval in as little as 24 hours, and the funds are in your account within 24 to 48 hours after approval. They work well if your personal credit isn’t terrible and you need funding quickly.
One Way How to Get a Business Loan is to Have a Workable, Professional Business Plan
The next step in how to get a small business loan is the business plan. You have to convince lenders that your business will be a good investment. Honestly, it’s best to hire professional writers and researchers to help you put this together. If you can’t, there are plenty of free resources online to help. This includes templates. For the most part, a well put together business plan should include the following.
An Executive Summary
Description
Strategies
Market Analysis
Analysis of audience
Competitive Analysis
Plan for Design and Development
Plan for Operation and Management
Financials
Financial Information
How to Get a Business Loan: There Are No Guarantees
The truth is, even if you do all of these things, there are no guarantees when it comes to how to get a business loan. However, these things can increase your chances in a huge way. All of it makes a difference. Still, fundability is the number one tool lenders use to make decisions. Business credit and personal credit are a huge part of this. If you are fundable, and you have a winning plan, you can get the funds you need to run and grow your business.
Under the brand-new Bankruptcy Code, individuals thinking about personal bankruptcy requires to send even more papers to certify for the treatment. After entry of an application for insolvency, comprehensive sustaining types as well as records should be all set at hand within 45days of sending the application, if not, after that the borrower’s instance would certainly be immediately rejected as well as he would certainly have to re-file for the insolvency consisting of re-paying the lawyer’s costs.
An additional prep work in declaring insolvency is the borrower’s certification of finishing an unique debt training course as well as pre-bankruptcy instruction, carried out by an agency-provider that is licensed by the United States trustee or personal bankruptcy area manager.
After the initials of declaring insolvency, the borrower comes to be safeguarded from financial institutions’ activities (‘ quit’ suits, wage understanding, or settlement needs) with a lawfully enforced ‘remain’– one of the most looked for after advantages for submitting personal bankruptcy. The 30-day ‘remain’- restriction is enforced especially for those insolvency filers that had actually currently been when released from a previous personal bankruptcy instance.
Below are various other essential notes on declaring insolvency:
As soon as a financial debt is ‘released’ after that the borrower is launched from the responsibility of spending for it. The lenders are restricted to accumulate any kind of repayment for released financial debts (other than those secured/lien-protected financial debts), or to make any kind of type of individual call with the borrower.
Not all financial debts are released and also are for that reason still based on borrower’s repayment. These financial debts are not dischargeable as a result of public law factors (based upon the financial obligation’s nature similar to tax obligation or worker’s wage, or the truth that the financial debts were from the borrower’s incorrect actions similar to damages to building).
The court typically provides the discharge from financial obligations as quickly as achievable for the borrower– 4mos.-4yrs. The insolvency court sends by mail a duplicate of the order of discharge to all lenders, the United States trustee, the situation trustee, the trustee’s lawyer, and also of program to the borrower as well as his lawyer.
Since he really did not pay the released financial debt, a lender that is likewise the borrower’s company might not finish the borrower’s work exclusively.
Under the brand-new Bankruptcy Code, individuals thinking about personal bankruptcy requires to send even more records to certify for the treatment. After entry of a request for personal bankruptcy, comprehensive sustaining kinds and also papers should be all set at hand within 45days of sending the request, if not, after that the borrower’s instance would certainly be instantly rejected as well as he would certainly have to re-file for the personal bankruptcy consisting of re-paying the lawyer’s charges. After the initials of declaring insolvency, the borrower comes to be secured from lenders’ activities (‘ quit’ suits, wage understanding, or repayment needs) with a legitimately enforced ‘remain’– one of the most looked for after advantages for submitting personal bankruptcy. The 30-day ‘remain’- limitation is enforced specifically for those personal bankruptcy filers that had actually currently been as soon as released from a previous personal bankruptcy situation.
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