How to get Small Business Loan
You’ve got the ideas, the desire, and the plan. All you need at
this point is some more money, right? Working with banks on small
business loans can be easy or difficult – it just depends on how
prepared you are. Follow this formula for obtaining small business
loans and you can move on to the more important things.
1. A winning business plan
Be sure you have an updated business plan. By preparing a detailed
business plan, you’ll already have your financial statements and
pro-formas prepared. Banks award small business loans to those that
have everything spelled out and planned. I strongly suggest that you
prepare a plan with as much detail as possible – including bios of
you and your partners, your track record, your strategies and
advantages, and more.
2. Show your personal credit history
Why? Your personal credit history is relevant to your small business
loan.
Especially if you are not long in business or you are just going
into business world, you don't have a track record. Hence, personal
credit history becomes very important to let the lender know how you
manage your own finance. They will expect you manage the fund loan
to you just like you manage your own money in a prudent way. They
will assume that you operate your business in the same manner that
you manage your personal finances. Bring your credit history with
you to reference as necessary. A statement of your personal
financial status - A list of your personal assets and debts to give
the lender a fuller financial picture.
3. Psychology preparation
Put yourself on the lender side for a moment. If someone asked you
for a small business loan, what you want to know from him?
I believe at least you'd want to know exactly why he or she wanted
the money and what the chances were that he or she would repay the
loan on time and in full.
Most asked two questions are : "What are you going to do with the
money?" and "Are you a good risk taker?",
Answering the first question means being fully conversant with all
the details of your business plan and being able to point to the
relevant financial statements, charts or graphs that will help
convince the lender that you need the amount of money you're asking
for to do what you want to do.
Answering the second question means having already given some
thought to the credit risk you represent to the lender and being
ready to address his or her concerns.
Some other question like, What collateral you have?
How much money you're personally willing to put into the business -
Being willing to risk your own money shows the lender that you're
committed to the enterprise.
4. Your expertise and experience in your
business
If you are really expertise and have lots of experience about your
business, it is also add the confidence level to the lender. The
lender also want to know more about you. So be prepared to talk
about yourself when you apply for a small business loan - your
background, your expertise, and even your aspirations.
5. Research all the lender and banks and
choose suitable one and compare
Start with institutions that you already do business with. These
places know your history and financial behavior, and they’re more
likely to give small business loans to those who’ve demonstrated
financial responsibility. Remember, a big part of the bank’s risk is
uncertainty regarding loan repayment. If they can reduce uncertainty
about you, you’re in a better position. If you have your mortgage
with a bank, that’s a good place to start asking about small
business loans.
6. Brief on the overall picture of applying
small business loan
Develop a winning business plan
Put together a written plan
Package the request
Determine the type of funding needed
Find the right lender
Prepare You and Your Business
Have a favorable business credit score
Have a favorable personal credit score (FICO or Beacon)
Business trade references
Business bank account
Do the research on what type of loan or lease you need
Develop a Plan
Have someone with good personal credit to sign for the loan or lease
Determine what business structure to use before applying for the
loan or lease
Determine why you need the money
Determine how much you need
Determine how you will pay it back
Put Together a Written Plan
Develop in writing an executive summary of the loan or lease your
looking for
Prepare a business plan
Prepare a marketing plan
<Summary>
You chance of getting small business loan successfully ib greatly
depend on how well the preparation you have done. But, if you really
fail the first time, don't get discourage. Find out from the lender
what is your weak point and improve it. This will greatly help your
chances of application for small business loan in next application.
|
|
