Most small business owners use debt financing to start, grow, or sustain their businesses. It can be an advantageous route for obtaining capital, as it gives you more control over the terms and lets you maintain full ownership of your business. But debt financing isn’t a foolproof process. Plenty of mistakes can be made along the way. And each of those mistakes brings its own consequences. Doing your due diligence up front can help mitigate the errors. First, identify how much money you’ll need. According to the Small Business Administration, the median small business loan is about $140,000. But that doesn’t mean your loan should be that size. Whether your loan is for $12,000 or $1,200,000, make sure you’re getting the perfect amount of money for your needs. Not identifying this amount up front can cost you a lot of unnecessary time and effort. The other important factor is determining when you’ll need the money. Different financing products have different timelines, so if you don’t figure out in advance when you want to receive the funding, you could find yourself with a loan that doesn’t match your unique situation. For example, excellent loans are available from the Small Business Association. These financing options have great interest rates and terms. But the application review process is notoriously slow, lasting up to 3 months. If you need your money quickly, it’s a critical error to waste time pursuing one of these loans. "While there are numerous options from which to choose, not all deliver the same benefits," says Tom Coletta, a senior vice president at Axiom Bank, regarding the loan products available to small business owners. "Make a short list of potential lenders by shopping around to compare offers. As you go through the process, keep in mind that bigger isn't always better—or safer." Some of the most popular financing options include: \tBusiness Line of Credit \tSBA Loan \tShort Term Loan \tMerchant Cash Advance \tBusiness Term Loan \tBusiness Credit Card \tEquipment Financing \tCommercial Mortgage \tAccounts Receivable Financing \tStartup Loan \tBusiness Acquisition Loan Once you’ve found the financing product best suited for your needs, it’s time to tackle the application. As with the selection process, now is not the time to hurry. Carefully gather all of the necessary documentation. If you omit any of the required elements from your application, don’t be surprised if it gets quickly thrown in the garbage can. While each loan has its unique requirements, here’s a sample list of what is usually needed for a bank loan: \tPersonal background information such as education history, previous addresses, names you’ve used, and criminal record \tYour resume \tA solid business plan, including proof of cash flow, profit and loss, and balance sheets \tCredit reports from the 3 major consumer credit reporting agencies \tPersonal and business tax returns from the past 3 years \tSigned personal financial statements \tProjected financial statements \tPersonal and business bank statements from the past year \tThe cost or value of personal or business property you can use as collateral if necessary \tBusiness licenses and registrations \tArticles of incorporation, copies of contracts with third parties, franchise agreements, or commercial leases Another common error small business owners make while seeking a loan is not having adequate credit. Before you even think about applying, you should visit TransUnion, Experian, and Equifax to see where you stand. Each loan will make clear what your credit score needs to be to qualify, so you’ll know pretty quickly whether or not your credit will be a roadblock. If your credit isn’t where it needs to be, look for ways to remedy the situation. By improving your credit, you’ll not only get access to more loan products, but you’ll also enjoy more favorable interest rates and terms once you’re approved. These factors can save you thousands of dollars over the life of your loan. The easiest way to improve your credit score is to continually examine your credit reports for mistakes. Research shows that about 1 in 5 Americans have mistakes on their reports, so it’s crucial that you’re an advocate for yourself and correct any problems you identify. Ultimately, even your best efforts will sometimes be unsuccessful. Most business loan requests in America are turned down. While it can be easy to take these rejections personally, know that it’s not a reflection of you personally. It’s more like your initiation into the world of entrepreneurship, where even the most successful individuals have had doors closed in their faces. Take each application as an opportunity to learn. If you’re turned down, look for ways to improve on the next round. If you’re approved, make a note of the positive steps you took to get approved. This kind of self-reflection will always make you a more wise and effective entrepreneur.