Small business start-ups as well as companies that have already been in business for a while know that at some point, applying for a business loan may be necessary. With the help of additional funding from a bank, you can meet the rising costs that your business faces day to day, or you can use the money to pay for marketing, renovations, new equipment, payroll, and more. However, the only issue with business loans is that it is practically impossible for your business to be approved unless you can show the banks that you are 100% prepared.

So what, exactly, do you need to show a bank in order to be approved for a loan?

1. A specific amount of money that you need to borrow

The worst thing you can do is show up at a bank unprepared to explain just how much money you need to borrow. You need to keep a meticulous list of all of the expenses that you plan to pay for using the money the bank lends you. Include any plans you have to purchase real estate, hire new employees, renovate, and more: it will show the bank that you have thought long and hard about the projected expenses your business will face in the near future.

2. Collateral

Showing a bank that you are prepared to back the loan with collateral proves to them that you are indeed prepared to take out and repay this loan. Collateral is somewhat like gambling – it shows the amount of confidence that you as a business owner have that you are capable of repayment. And if you aren’t prepared to use your own money – or even your office building or your own home – to back the loan, you probably aren’t prepared to take out a loan in the first place. Before you head to the bank, take into consideration which assets you will be offering as collateral.

3. Your Own Personal Credit

In most cases, if your business is not a corporation, your personal credit will play a role in the bank’s decision whether or not to approve your business for a loan. This is why it is necessary to make sure your own credit is in good shape before applying for a loan. Banks are not going to want to lend money to anybody with a history of not being able to repay the money that is lent to them, even if the business’ credit is in relatively good shape. Having bad personal credit might also mean that you need to put more collateral at stake when approaching a bank.

4. You must have a business plan

If you don’t have a detailed business plan ready when confronting a bank, you might as well already consider alternative financing options for your business. Your business plan needs to include your business’ projected finances for at least the next two years, as well as how you plan to repay the money you have borrowed. The more detailed your business plan is, the more the bank will trust that you are prepared to repay the money you borrow from them.

What to Do If You Are Denied a Bank Loan

If you take all the proper steps and your business is still denied a loan from a bank, don’t worry! There are alternative funding options available that can infuse your business with cash within one business week. Merchant cash advance companies are known for working with the many businesses who have been turned down for a bank loan because of a bad credit score, insufficient collateral, or other reasons. These business cash advances don’t expect any of the aforementioned requirements from your business. In fact, all that is required is to show that your business has been operating for at least 6 months; that your business processes credit cards; and your past 6 months of credit card statements. That’s it! To learn more about how merchant cash advances work, visit the Entrust Cash Advance site or How Does a Merchant Cash Advance Work