The Five Must Know Things to Consider Before Applying for a Business Loan
- Written by Fred Barkley
USA 10 September 2014. One of, if not the, most popular avenue for beginning a brand new business is to apply for a business loan from a government agency or a bank in order to generate the initial funds. This is a solid method of beginning your new venture, but there are a great deal of grey areas and difficult issues to weave in and out of beforehand.
Below are the top five, must know things which you should consider before you begin the process of applying for your own business loan.
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An eloquent plan will stand you in good stead
No matter who the lender is, they will always want to make sure that the loan is going to a safe, reliable and smart person and venture before anything is signed or agreed. With this in mind, you must have a solid business proposal to show. This proposal means detailing everything from the product that you will sell, or create to the forecast of the specific business market you’re looking to break into.
A successful plan will contain a summary of the business goals, the expected revenues and returns, a very up to date examination of other competitors and a diverse range of strategies for expanding the business (About.com).
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Have clear documentation of your credit history
Any prior business credit, as well as personal credit, history is a very relevant factor in your ability to secure a loan. The lender will want proof of how reliable you are and how structured the business itself is.
Although the business history is separate from your own, bear in mind that it’s through you that the business will either sink or float – so everything is relevant (TheCharlottePost.com).
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Know, in detail, where every penny will go
It won’t do to state a specific figure for your loan and then not have a detailed, itemised breakdown of expenses. In order to curry favour and develop a trust with your lender you need to be able to account for every single penny which may come your way. This includes hiring help, marketing, advertising, business expenses, expansion and so on (About.com).
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Discuss repayment
You need to be able to explain how this loan is the impetus for bigger and better things for your business. This means convincing the lender that with this start up loan, you’ll soon be able to repay the capital, and do so in a regular, consistent and reliable manner.
You should be prepared to discuss a tangible, figure heavy repayment schedule at the same time as receiving your loan – so again, thorough homework is key (SBA.gov).
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Have pride and confidence
Show no weakness when it comes to discussing the intricacies of your business venture – you should be proud of it, and have nothing but faith in its projected earnings. Most lenders know that you will be looking to several places for your loan, so show adaptability as well; if you are rejected, ask why so you can improve your next pitch.
References
About.com. Before You Apply for a Business Loan. Available: http://entrepreneurs.about.com/od/financing/a/beforebizloan.htm [accessed September 6th, 2014].
TheCharlottePost.com. Business. Available: http://www.thecharlottepost.com/news/2014/08/27/business/5-things-you-should-know-about-getting-approved-for-a-business-loan/
About.com. Small Business Loan 101. Available: http://sbinformation.about.com/od/creditloans/a/ucbusinessloan.htm
SBA.gov. Business Loans – What Lenders Look For and Tips for Winning Them Over. Available: http://www.sba.gov/blogs/business-loans-what-lenders-look-and-tips-winning-them-over