How to Get a Small Business Loan in Southern California
Small Business Assistance Tool
Use this helpful online tool to find assistance for starting, growing and accelerating your business.
Are You Ready For a Small Business Loan?
At some point you’ll seek a business loan, to take on a new contract, hire employees, or finance an expansion to a new location. Whatever you do, don’t surf the web for a business loan. Online predators make huge profits from unwary borrowers anxious to get started with their business and reluctant to take the right steps to get a good loan.
For most business loans you’ll need to
- prove your business has enough income to pay its expenses and the loan payment and
- have your finances in order
Most lenders will need to see your business and personal income and expenses are kept separate with different bank accounts and credit cards.
Avoid surfing the web for a business loan.
Lenders will need to see you have a good history of repaying your loans (credit score) and reporting your income (tax returns.)
TAKE TIME TO PREPARE BEFORE YOU APPLY FOR A BUSINESS LOAN
Great Advice From Our Micro-Lenders
- Be prepared to justify your income and expense projections; be able to show that the income is based on X number of units or services sold over a period of time for each month, i.e. you are open 300 hours a month and expect to sell an average of 20 units every hour with an average price of $10.00. What are the costs based on? Include details such as hours of opening, cost of raw materials, rate of pay?
- If you are a new business, expect to show you have funds to contribute to the project and support your personal income needs.
- Check your personal credit score, use an online service to be sure there are no surprises. Pay down revolving debt to 30% or below the maximum allowed to maximize our credit score presentation.
- Have your accountant look over your internal bookkeeping to be sure it is correct.
– Stacey Sanchez, Senior Community Loan Officer for CDC Small Business Finance
- Monitor your personal credit by paying bills on time, not having more than 3 inquiries in 6 months, and keeping credit card utilization at 30% or below. Lenders require a personal guaranty and your personal credit is important to be eligible for a loan.
- Save money before your start your business so you can show you have capital to invest if needed. Lenders don’t like to take 100% of the risk, they want to know you have “skin in the game.” Carry a cash reserve so you can use your money to get more money.
- Keep good records for your business transactions using an accounting software like QuickBooks so you can print a Balance Sheet and Income Statement when you need it. Also, understanding what happened earlier, can help you forecast for the future and prepare for it. If you foresee that you will need funds during the holiday season, you can start the process now and not when your funds are depleted.
- If you are a startup, draft a business plan to include a description of the business, your experience & knowledge of the industry, a detail of the business capital needs, a marketing plan, and the financial projections. Some lenders require a business plan for young businesses as well.
- File your taxes timely, most lenders will ask for 2 most recent tax returns (personal and business) and might reject your application if you have not filed them.
– Rosalinda Delgado, Business, Development Manager for Accion San Diego
Don’t be discouraged by the process, especially if it’s the first time you’ve tried for a business loan. The micro-lenders can put you in touch with business counselors to help you determine what type of loan is best for you, when is the best time to borrow, and how much. Using business capital effectively to grow your business is an important step to success.
Don’t Get Fooled by Bad Lenders
It’s a sign of the times. Some online loan companies are taking advantage of the desperate situation business owners are in. These predatory lenders get …