Getting a Small Business Loan
If you lack the necessary funds for starting your business getting a small business loan is a common method of acquiring the money needed for business expenses. Getting a small business loan can be done by visiting one of your local banks; however not everyone gets accepted for a business loan. Lenders and Investors are aware that the startup stage of a business often poses the most risk. Existing businesses have an advantage over start-ups since lenders and investors view them as more stable. Getting a small business loan will not be easy, however it is not impossible. Being prepared and knowing what to expect will better your chances of getting a small business loan.
Tips you should know
Know how much money you will need– Sounds simple enough doesn’t it? However many entrepreneurs underestimate how much money they really need to start their business. One of the top reasons why small businesses fail is because the owner didn’t have enough funds to support or grow their business. However on the other hand borrowing too much money will take you longer to pay back and can result in higher interest rate fees. Do your research and come up with an accurate estimation of how much you will need before getting a small business loan. Be sure you are financially prepared if an unexpected event should happen. Look at not only your short term expenses but also your long term expenses. Keep in mind your business may not make any profits for the first couple of months (or even years).
Schedule a meeting-If possible call your local bank ahead of time or arrange an appointment to see the loan officer. Many bankers prefer that you call ahead to schedule a meeting prior to coming in.
Learn about the small business loan terms– Knowing about the different loan terms will help prepare you for negotiation and better your chances of achieving favorable loan terms.
Bring your business plan– A business plan is essential when acquiring a small business loan because loan officers want to see that you have planned out your business venture. Your business plan will help the loan officer determine if your likelihood of paying them back is favorable.
Provide Personal Financial Documents– Many times loan officers will want to see your personal financial history. A credit rating report or a tax return should be sufficient.
Demonstrate your expertise– Demonstrate to the loan officer that you know your stuff! Loan officers like to see financial information so have that prepared. Show future profit projections for your business and a debt repayment plan. You must be confident in your business plan and show the lender that you are capable of paying them back.
Don’t sign until you are ready – After the negotiation process is over the loan officer will prepare the documents if you are accepted. You can then take the documents to an adviser such as an attorney or business consultant before signing it.
Facing Rejection– If you are rejected for a business loan don’t let it discourage you. If you really believe in your business idea keep trying. Try getting a small business loan through the SBA. Learn from your experiences and improve. Read Reasons why business loans get rejected.