Entrepreneurs are idea people, and every day they grow business concepts into great small to medium sized businesses (SMBs). Often this starts on a small scale and once the business plan is proven and some traction takes hold, these same entrepreneurs are already thinking: What can I do better? How can I broaden my reach? How can my business grow and flourish? And, many times the answer is simply: money.

Even if you have your own personal funds or friends and family willing to help invest in your business expansion, you may want to consider a business loan to facilitate growth.

Investing in your company makes great business sense but understanding how to approach a lender to not only obtain a business loan but build a partnership is a wise move that could help secure your future. To do this, a SMB needs to see their business like a lender.

Is your company credit-worthy?

When evaluating an SMB, lenders look at several factors that help them decide whether the company and its obligors are credit-worthy. The exact factors vary depending on the specific lender—banks can be very strict and need deep documentation, while alternative lenders may require a lot less paperwork. No matter what type of lender you select, there are a few things that will help you prepare:

1. A solid business plan. This does not have to be a formal document; however, you must be able to communicate to your lender what your business does, know what you're expecting for revenue in the next 1-5 years and how you are going to use the money you're requesting to borrow. At a minimum, you need to be prepared with:

• The amount required
• Planned use of funds
• How you will repay the money

2. A full understanding of your financials. Your lender needs to see that your company is well poised to repay the money. You will need to be able to answer questions about your revenue and profit, expenses and monthly bank balances. For a larger loan, you should be prepared with full financial statements and tax returns, but for a smaller loan you may only need to provide your last three-months of bank statements.

3. Knowledge of your personal credit history. Many SMB owners do not realize that their personal credit may have bearing on whether their business is considered credit-worthy. Some financing options may require a personal guarantee from anyone with documented ownership in the company, so your lender will need to assess your personal credit-worthiness as well as your company's. Take advantage of your once-yearly free credit report from each of the three national credit bureaus, Equifax®, Experian™ and TransUnion®, and if you find any negative items be prepared to explain how you are fixing them.

4. Awareness of your financing options. Understanding the differences between financing options—leasing, financing and loan or working capital particularly—is good knowledge for any business owner. Each option has benefits depending on the type of purchase you're making or how you're going to use the funds so there is no one-size-fits-all solution. The right lender will help you determine which of these options is the best fit based on your unique business needs and will encourage you to talk with your accountant or tax professional if your purchases may qualify for any tax incentives.

Approaching lenders for financing or a loan does not have to be a complicated or overwhelming process. Once you understand what lenders look at to determine your credit-worthiness, you can come to the table prepared.

Download this free e-book comparing bank and alternative financing options to help you decide which type of lender is right for you.

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In need of financing for your SMB? Work with Ascentium Capital, the #1 private independent finance company in the US. Our fast, flexible financing programs can be customized to suit your business needs, for virtually any business purchase.

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