Maximize Your Chance to Get a Small Business Loan
A Home Business Article Contributed by Donna M. Brown
Maximize Your Chance to Get a Small Business Loan
Maximize Your Chance to Get a Small Business Loan
Gather Information You are Likely to Need to Obtain a Small Business Loan
When you seek a small business loan be prepared to provide detailed, well-organized information to your potential lender.
Some lenders are willing to accept more risk than others. In order to apply for - and ultimately get - a small business loan, be ready to answer any questions the lender might throw your way. If you have researched every possible aspect of your business and still decide to proceed, a lender is more likely to consider you a solid customer.
A Small Business Loan Requires You to Meet a Lender's Criteria
Vastly increase your chance to get a small business loan by knowing the answers to the following questions. Prepare the information in a presentation format in case you are asked to justify your need for and worthiness to receive a small business loan.
Why do you need the money?
Explain what you will use the money for. Lenders want to know how closely your business relates to your previous experience and areas of expertise. It's not enough to say you want the money to start an under water basket-weaving class. Be prepared to detail a budget describing exactly how you plan to use proceeds from your small business loan. Assume you are asking for a $350, 000 front from your local lender. How much of that money will be used for supplies? Marketing? Location? Employees? Shipping? Office furniture and supplies? Utilities?
The more you break down your budget, the more likely it is a small business loan lender will be satisfied that you have done your homework. Research your cost estimates and be as realistic as possible. Lenders pass out a lot of money and they know how much it costs to get a business started. The question they want to answer is, "Do you know how much it will cost to start your business? " and "Are you asking for enough money? " and "Are you asking for too much? "
Do you know what you're asking for? What kind of loan do you want?
Once you have established the amount you need from your small business loan, shop around. What kind of repayment terms are you willing to accept? What kind of terms should you expect? How long will you need to pay the money back? Will you make weekly, monthly, quarterly or annual payments?
Can you repay the small business loan? How?
Be prepared to show the lender how this money will help to start a successful business (or improve an established business) to the level that it will allow you to make regular and on time payments. Break down the numbers and have handy facts to support your projections.
What kind of security to you have to offer in exchange for a small business loan?
It is possible to get unsecured loans, but they are much harder to obtain and the terms can be much more cost prohibitive. Be prepared to offer security for your loan in order to reassure the lender. Lenders are looking for people who are willing to risk their own assets in their own business.
Is your business plan adequate?
If you haven't prepared a small business plan, don't even begin to look for a small business loan. First things first, your business plan is a top priority. Answer questions about management capabilities, the market into which you are trying to tap and other details that show you have given risk assessment some serious thought.
How secure are you now?
Many lenders will require three years of financial statements professionally prepared by you or an qualified accountant. This is especially true if you are asking for money to expand an existing business. If this is a start up business, lenders may rely on your personal credit worthiness and work history. Use accounting software to prepare these financial documents and ask a tax preparation specialist or certified public accountant to sign off on them.
The Small Business Loan Process Can Be Cumbersome, but Not Impossible
If you begin the small business loan process well prepared, you will be way ahead of your competitors.
Take time to practice your presentation and be clear about what you want so you can convince others of your case. Ask family members, business associates and friends to review your presentation. Ask them to evaluate your delivery, but to determine whether or not they would give you a loan (assuming they had the money of course) under the same circumstances. You will find plenty of holes in your presentation at first. Be prepared to plug them before you enter any bank!
