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Obtaining a Small Business Loan
By Brandon | Last edited: August 1, 2008
The fact of the matter is that when you want to start a small business, you will almost always be seeking out a business loan. Even if you have the initial capital needed to start the business, it is necessary to then have quite a bit of money on top of that secured to cover the expenses for at least the first year of that business (since many small businesses take many months, if not years, before they finally start to become profitable). For this reason, it is important that those looking to start a small business know how to obtain a good business loan in order to give their small business the best chance to be successful.
The most important thing to is know what the expectations are for getting approved and for getting the lowest interest rate possible and to then be proactive about taking the steps necessary to insure these things now. The first thing that you will need when looking to get a business loan is a business plan. No, not those bundle of papers you threw together because someone told you that you should write one but you didn’t want to. You need a concise, well written, well thought out business plan that shows the lender what you plan to do with your business and what you plan to do with the money from the loan to make your business work. The lender wants you to blow him away with your amazing plans about what your business is going to do.
Next, have cash flow projections. These need to be well thought out and reasonable. Don’t assume that you will be making millions in your first month, the lender won’t buy it. The lender wants to be assured that their money is safe and they want to know that you will be able to pay the money back. Have cash flow projections ready that will show what your business will be making and when, show the lender that their money is safe.
Have a statement of your own personal financial status. The lender isn’t just loaning the money for the business, they are trusting that money with you. They want to be assured that you are a trustworthy person when it comes to money. Have a list of your personal assets and debts and have a credit report to show that you can be trusted with the money being lent. The assets show that you have collateral in case everything falls through.
Also, be willing to your own money into the business. Putting what you can into the business shows the lender that you are willing to risk your own money because you really think this is going to work. The lender will feel more comfortable offering you a lower rate when you are putting in your own money as well. Also, show the lender your expertise in the field you are entering with your business. Make sure they know that you know the ropes.
With these steps followed, you as a business owner will be much more likely to be able to be approved for a small business loan in the amount you require for a reasonable interest rate. Business loans are only too important and it is critical that they are given heavy consideration and are prepared for in the first stages of starting a business. Obtaining the right small business loan at the best rate could be the difference in making your small business a success.
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