Small businesses are the economic lifeblood of this country, and the majority of them began with help in the form of a small business loan. Very few small business owners have the funds available privately to start or expand their enterprise, so most are forced to seek out loans to move their vision forward.
But, there are some things that everyone should know before applying for a small business loan. It’s always important to know what the bank or lending institution is looking for, what factors go into their decision to either grant or reject your loan. By playing to these factors, you can better your chances of securing that money for your business.
What is your personal story? Firstly, the bank will want to know about you. Your credit history, experience and education will all be factors preliminarily considered in the process of your application. These things speak to who you are as a business person, your credibility for running your own business.
What is your business plan? The meat of your proposal will be in your business plan. This is an outline you will present to the bank detailing your business idea while providing answers to questions the bank has.
How much are you applying for? This figure should be all-encompassing. It should include costs for startup and overhead, as well as operations costs like payroll and inventory. It is very important to you and the bank that this number be as accurate as possible.
Where is this money going? Again, accuracy and detail are important here. Your business plan should have a detailed breakdown of how much is going where and for what.
When can you repay your loan? This is the question that anyone, from the bank to your wealthy relative will want an answer for. Be professional. Use financial statements and cash-flow projections to illustrate how your business will generate profit and be a good investment for the bank.