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Thinking about starting a business? Do you already have financing or are you going to get a business loan? What do you already know? What do you need to know? This can be one of the scariest and most worriesome parts of starting a new business.
If you are prepared you will likely get approved and get a loan faster!
WHAT TO TAKE TO THE LENDER?
- BUSINESS PLAN- Most lenders want to see a written business plan showing why you need the money and how it is going to be used. The business plan should be as detailed as possible to give the lender a clear picture of the business.
- CASH FLOW PROJECTIONS: Of course the lenders want to make sure they are going to get the money back they loan, providing projected cash flow will help them gauge how long and if exactly the loan should be able to be paid back.
- PERSONAL FINANCIAL INFO: Personal tax returns as well as credit reports help the lender see how financially responsible an individual might be with the business loan. The higher the credit score & low debt/income ratio paints a picture for the lender that the potential borrower is a lower default risk.
The lender will have a few other tough questions for potential borrowers- remember their #1 concern is whether this loan is a good risk to be repaid.
1. What collateral (assets) will be used to secure the loan?
- Your personal home
- Equipment and/or inventory of the business
- Accounts receivable
- Stocks and bonds
2. How much money can you personally put into the business?
- Can you afford to borrow money from your personal savings?
- Would any family or friends be willing to give you money?
- Do you have an IRA or retirement funds that can be cashed in?
3.What is your knowledge of the business that the loan is going to be used for?
- The more education and knowledge that you have on the business your starting the more confident the lender will feel loaning money.
4. I have prepared all of the documents I need. Is there a particular financial institution that I should go to first?
- Start by going to the bank where you do your checking and savings, and have built a good repor with. Having a good track history with their company may also help you throughout the loan process because you have established a positive history with them. You can always shop for better rates, but if it is not a huge difference, it may not be worth going elsewhere.
APPLY FOR A SMALL BUSINESS LOAN
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