What Makes a Great Loan Application?

So you're a small business owner who is in need of funding. Maybe you've bootstrapped it so far, borrowed from friends and family or even put together a Kickstarter. Whatever the case may be, if you are an entrepreneur who is now looking for a loan to help get you to the next step of growth, have no fear! Keep reading to learn some helpful tips that if followed could help you get the stamp of approval!

As a brief intro, we are the Utah Microloan Fund, a non-profit organization that since 1991 has provided microloans from $5k - $50k to small business owners throughout the state of Utah. As a CDFI (Community Development Financial Institution) our mission is to help fill the gap of funding for first time entrepreneurs as well as underserved communities including minorities, women, Veterans, LGBTQ+, and rural.

Over 30+ years of lending has led us to be pretty dang good at identifying what makes some applications meh vs outstanding so here's our list!

Be proactive. 🏃‍♀️

• The fact that you are reading this blog is a great sign! Many people apply for a loan completely unprepared or they are applying because they needed money, like, yesterday. Being proactive about being prepared for the application process and planning ahead on when you will need funds makes the process much smoother for us and y'all!
• For the Utah Microloan Fund specifically you are also required to attend our virtual loan orientation held every Tuesday at 9am. Sign up here. 

​
Create a strong business plan & cashflow projection. ✏️

• A well-written business plan demonstrates that you have a clear understanding of your business goals, target market, competition, and financial projections. Your plan should also outline how the loan funds will be used and how you plan to repay the loan. Preparing a 12 month cashflow projection also shows that your pricing and costs make sense, you have thought of all in and outflows, and know your numbers.
  •  Not sure if yours is looking good? Check out our virtual Building Your Business Series here. 

​
Request a reasonable loan amount. 💰

• The loan amount you request should be reasonable and in line with your business needs. You will really want to think about what are your true business needs vs wants. What makes sense for your business when you factor in your costs and revenue.  If you're trying to do things like using your loan to pay yourself a sky-high owner's wage, think again! 

Have a clear Use of Funds. 📄

• You want to be super clear with your lender on what exactly you are requesting the money for. Loan funds can be used for things like working capital, marketing, purchasing equipment, supplies, inventory, hiring, etc. The more specific you are, the more we can see that you've really thought out your purchases. 

Don't even think about lying! 👀

• Trust us, we lenders have seen it all. Have previous issues with debt? Credit not so great? Be honest about it! The almighty credit report almost never lies so it's always prudent to be upfront with your lender about your history. Honestly also goes along with how you are spending your loan funds, criminal history, financials, etc. 

Know your credit. 💵

• Speaking of credit, at least for us, you don't have to have the most stellar score in the world but what we do want to see is that you are making payments on time if debt exists, don't have a current bankruptcy (paid off is okay for us), and that you have a plan for unpaid debt. If we see you are not paying other people back, we'll think you won't pay us back and then we can't make it rain!

Think of collateral or cosigner options. 🚚

• Depending on the size of the loan, your credit history, and time in business we may require collateral or a cosigner to secure your loan. Collateral can include assets such as equipment, inventory, a vehicle or real estate, while a co-signor is vouching that they will make sure you or they pay the loan back.  If you're brand new in business and want $50k this might be a path you have to take for your first loan.

Show off! ✨

• Demonstrating your experience and qualifications in your industry can help to instill confidence that you are capable of running a successful business. This can include relevant education, certifications, or previous work experience.

Ask for help. 🙋🏽‍♂️

• When it comes to entrepreneurship, it takes a village! There are tons of free resources including business advisors, classes, and meetups for small business owners like you so don't be afraid to ask questions and get involved. 
• We have a great relationship with Small Business Development Centers across the state and they offer FREE one-on-one business advising and can help work in tandem with you to apply for a loan. Find a location near you at https://utahsbdc.org/locations

By keeping these factors in mind and presenting a well-organized and thought-out loan application, you can increase your chances of getting approved for a loan. Good luck with your application and we look forward to working with you! Learn more at www.umlf.org. 

---