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How to Be a Strong Candidate for a Local Bank Small Business Loan

Most small business owners are aware of the need of funding to grow or expand their businesses. One of the best ways to receive the funding that a business needs is to go to your local bank to find out if you’re eligible for a small business loan. Small business loans can offer you the cash you need for your business. No matter what you need funding for, small business loans can be difficult to get due to the large number of businesses seeking them out. 

There are two basic kinds of business loans available at your local bank. Term loans consist of you receiving a lump sum deposited into your account that you repay on a predetermined repayment schedule. Another type of popular loan is a loan from the Small Business Administration (SBA). These loans are similar to term loans, only they usually have longer repayment periods and offer lower interest rates. 

As we stated before, local small business loans can be difficult to get due to the large pool of applications that the bank has to choose from. The best way to improve your chances of being approved for a local small business loan is to ensure that you stand out from your competition. To do so, you need to know exactly what your bank is looking for when it comes to approving small business loans. 

What Do Local Banks Look for in Candidates for Local Loans?

Banks want to make sure that they will be repaid the money that they lend you. This means that they have a set of criteria that they use to determine whether or not you are eligible for a loan. To be approved, you will need to be seen as a low-risk borrower. Here are a few qualities that local lenders look for in approving applications for small business loans:


Your local lender wants to see that your business is making money. The reason why is simple. If your business is a profitable one, they know that you will be able to pay off the loan in a timely manner. This is why many small business loans require that your business be an established one. It’s difficult to determine whether or not you will have the money to pay off the loan if you have no history of making a profit. 


Banks also take into consideration what your business and personal credit scores are. If you have poor credit, a lender will find you to be a high-risk candidate. Lenders need to see that you have a history of handling your money well. When they can see that you’ve paid your bills on time and repaid your debts, they will be more likely to approve your loan. If you have a strong credit history or can show that you have worked hard to improve a poor one, you’ll be a stronger candidate for a small business loan. 

Financial History

In addition to your credit score, your local bank will also look at your financial history. This includes seeing if you have any tax liens, outstanding debts or recent bankruptcies. Lenders will also want to see that you’ve invested personally in your business. This is due to the fact that business owners who hold a personal stake in their business are more likely to work hard to succeed in their business endeavors, making it more likely that the loan will be paid off in full. 


Lenders also want to see that you have some kind of collateral to offer against the loan. Borrowers who put up business or personal assets in the event that they fail to repay the loan are more appealing to banks, as the lender stands to gain something if the loan is defaulted on. 

Length of Time in Business

Established businesses have an easier time being approved for a small business loan due to the fact that they are seen as being more reliable. If your business has been around for several years, lenders will feel more comfortable approving a loan because your business will be seen as having staying power within the community. Being an established business also means that you have plenty of data and history for the bank to see that your business is stable. 


Strong Business Plan

Having an in-depth business plan that fully spells out your goals and what you will do with the money from your small business loan also makes banks more comfortable with your business. If the bank sees that you have goals and a means to achieve those goals, they will see you as being a more serious and thoughtful candidate. 

Other Financing Options for Small Business Owners – Alternative Lenders

If you aren’t able to meet the strict requirements in place for a local small business loan, there are other options available to you. Some of these options include loans from alternative lenders like First Choice Business Capital, short-term loans and equipment financing. No matter what your financing needs are, you will find that there are many options available to you. Pursuing alternative financing options can help you to build up your credit so that you will eventually be a strong candidate for a local small business loan.