5 Tips for Getting Business Loans
Getting a business loan can be the key to getting your business or startup off the ground and running.
Without funds to help with a startup or a struggling business, you stand in danger of becoming a financial casualty. The statistics are overwhelmingly against startup businesses, as most fail.
Image source: Pixabay
Business loans can help you invest in crucial areas of your business. Gaining access to business loans isn’t a sure thing, of course, but the following steps can help you ensure success when you approach a lender about funding your company.
A Solid Business Plan
If you present a solid business plan to a potential lender, it will help convince them that your company is a safe bet for their money. Essentially, they want to know how the business will grow and make profit, as this makes them more likely to get repaid in a timely fashion. A good business plan should include:
- A detailed marketing strategy.
- An analysis of the competition in your industry.
- Financial projections.
- The story behind your business and answers to common questions that lenders ask. Why did you start this business? Why are you the right person to lead this company? Why is this business necessary in the marketplace?
Personal Contribution
If you’re approaching a lender about a new business, rather than an existing company, showing proof that you’ve invested your own money in the company will show your faith that the business will succeed. This is viewed as a good sign by those offering business loans. Contributions can take the form of:
- Cash, into the business bank account.
- Assets, such as equipment or property.
- Existing infrastructure, such as employees or websites that have been paid for out of pocket.
Approach the Right Lender
The bigger the bank, the less likely it is to take a risk on a smaller, unknown company. If you have a relationship with a local bank or credit union, approach them rather than a larger federal bank.
Image source: Pixabay
Have Collateral
Using some type of collateral when approaching lenders about business loans will certainly increase your odds of getting what you’re looking for. Depending on the size of loan required, this could include using:
- A vehicle.
- Your home.
- Savings or other business assets.
- Accounts receivable.
Supporting Documentation
Any supporting documentation you can provide to a potential lender could help strengthen your case when applying for business loans. Examples of this include:
- Documentation showing the borrowing and repayments of past business loans.
- Written references from credible sources who vouch for your ability to repay the loan.
Any promises or contracts that show sources of income for your company in the future. For example, if you’ve signed a contract to sell a large volume of product to a customer but need a loan to create the inventory, this could very strongly support your case.
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