Securing funding for your small business doesn’t start with the loan application—it starts with making your business fundable. Fundability refers to how attractive your business appears to lenders, vendors, and investors. By improving your fundability, you increase your chances of approval, unlock better loan terms, and create a financial foundation for sustainable growth.
In this guide, you’ll learn how to enhance your business’s fundability step by step. For deeper insights and 50+ funding options, join this Free Training to discover how to attract lenders and secure the capital you need.
What Is Fundability and Why Is It Important?
Fundability is a measure of your business’s ability to secure financing. Lenders use it to assess risk and determine whether to approve your application.
Key Elements of Fundability:
- Financial Health: Revenue, profit margins, and cash flow stability.
- Professional Credibility: Your business’s legitimacy and presentation.
- Creditworthiness: Personal and business credit scores.
- Industry Risk: Some industries are considered higher risk than others.
Improving fundability gives you leverage with lenders and makes the loan process faster and smoother.
Step 1: Establish Your Business as a Legal Entity
One of the first steps to fundability is creating a clear separation between your personal and business finances.
What You Need to Do:
- Form a Legal Entity: Register your business as an LLC, corporation, or other structure. Sole proprietorships make it harder to build business credit.
- Get an EIN: An Employer Identification Number is essential for tax filings and financial accounts.
- Open a Business Bank Account: Use this account exclusively for business income and expenses.
Step 2: Present Your Business Professionally
Your business’s presentation can significantly influence how lenders perceive you.
Key Steps to Establish Credibility:
- Business Address: Use a physical or virtual office address. Avoid P.O. boxes or residential addresses.
- Dedicated Phone Number: Obtain a business phone line and list it in directories like the National 411.
- Professional Website: Create a website that clearly outlines your services, mission, and contact information.
- Email Address: Use a domain-based email (e.g., info@yourbusiness.com).
A professional presence signals that your business is legitimate and ready for growth.
Step 3: Build Your Business Credit Profile
Business credit is one of the most important factors in fundability. Even if your personal credit isn’t perfect, a strong business credit profile can make lenders view you more favorably.
How to Build Business Credit:
- Register with Dun & Bradstreet: Get your D-U-N-S Number to start building your profile.
- Open Vendor Accounts: Work with suppliers like Quill, Uline, and Grainger that report payment history to credit bureaus.
- Pay On Time (or Early): Consistent, timely payments are crucial for a strong credit score.
- Monitor Your Credit: Regularly review reports from Dun & Bradstreet, Experian Business, and Equifax Business.
Step 4: Strengthen Your Financial Health
Lenders want to see that your business is financially stable and capable of repaying loans.
Steps to Improve Financial Health:
- Track Revenue Trends: Show steady or growing income over time.
- Reduce Debt: Keep your debt-to-income ratio low.
- Organize Financial Documents: Maintain up-to-date tax returns, profit and loss statements, and balance sheets.
Step 5: Reduce Perceived Risk
Lenders assess risk when deciding whether to approve a loan. The lower the risk, the higher your chances of approval.
How to Reduce Risk:
- Stabilize Cash Flow: Automate invoicing and reduce payment cycles to maintain consistent cash flow.
- Diversify Income Streams: Multiple revenue sources can make your business more resilient.
- Build a Savings Cushion: A healthy business savings account reassures lenders.
Step 6: Improve Personal Credit (If Necessary)
For newer businesses or larger loans, lenders may still evaluate your personal credit.
Quick Tips to Improve Personal Credit:
- Pay down existing debt.
- Dispute errors on your credit report.
- Avoid opening multiple credit accounts at once.
Improving personal credit can complement a strong business credit profile.
Step 7: Choose the Right Lenders
Different lenders have different requirements and criteria. Choosing the right one can save time and effort.
Types of Lenders:
- Traditional Banks: Best for established businesses with strong credit.
- Online Lenders: Great for fast approvals and flexible requirements.
- SBA-Approved Lenders: Offer government-backed loans with favorable terms.
Pro Tip:
Research each lender’s requirements before applying to ensure your business meets their criteria.
Step 8: Leverage Your Fundability to Negotiate
A fundable business gives you leverage to negotiate better loan terms, such as lower interest rates or longer repayment periods.
How to Negotiate:
- Highlight your business’s strengths, such as consistent revenue or a strong credit profile.
- Compare offers from multiple lenders to find the best terms.
Common Mistakes to Avoid
Even with a strong fundability strategy, mistakes can hurt your chances of approval.
- Mixing Finances: Keep personal and business finances separate at all times.
- Ignoring Online Presence: Lenders may research your business online—ensure your website and reviews reflect professionalism.
- Skipping Credit Monitoring: Regularly review your business credit profile for errors or updates.
How the Free Training Can Help
Making your business fundable takes strategy and effort, but you don’t have to go it alone. Join this Free Training to learn:
- Proven steps to improve fundability.
- Insider tips for building a strong business credit profile.
- How to access 50+ funding options, even with poor credit or no collateral.
Conclusion
Fundability is the foundation of your business’s financial future. By presenting your business professionally, building credit, and strengthening financial health, you can attract lenders, secure better terms, and unlock growth opportunities.
Take the next step by joining the Free Training today and learn how to make your business irresistible to lenders.