Getting a Business Loan
HOW TO BE SUCCESSFUL IN GETTING A BUSINESS LOAN
Thursday, October 27, 2011
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Tuesday, October 4, 2011
Getting a Business Loan
Sooner or later most businesses need to get a business loan, whether to get the operating capital for business startup or to finance an expansion. But whether you're approaching a bank or a friend for a small business loan, the lender will have the same expectations.
You can greatly increase your chances of successfully securing a business loan by being prepared to meet those expectations.
Put yourself on the other side of the desk for a moment. If someone asked you for a business loan, you'd want to know exactly why he or she wanted the money and what the chances were that he or she would repay the loan in full and on time.
So the key to getting a business loan is preparation. First, gather together the documents that will help persuade the lender that a business loan is necessary and that you are a good risk. You will need:
A business plan - The business plan show the lender not only why you want a business loan but what you plan to do with the money.
Cash flow projections - What's the first question any lender has? Will you be able to repay the loan. Your business's cash flow projections give lenders concrete financial data that they can use to assess this risk.
Things To Consider Before Getting A Business Loan
If you decide to get a business loan from a bank or other lending institution, there are several things to consider. Start by asking yourself these questions:
- For what, exactly, is the loan going to be used?
- What length should the loan be?
- What assets can you use as collateral?
The most important task to getting a business loan
The most important task to getting a business loan is preparing a business plan. The business plan needs to show the lender that providing you with a business loan is a low-risk proposition. Your business plan must answer the questions a lending institution would ask. These questions usually are:
How much money do you need?
If you are starting a business, this should be included at least in the start-up capital estimate. Accuracy is important, so request enough money to invest wisely.
What are you going to do with the money?
You will have to provide, in detail, the designated use of every dollar requested. A small business loan is often needed for: operations (new employees, marketing, etc.), assets (equipment, real estate, etc.), or to pay off business debts.
When will you repay the business loan?
Explain in detail how this business loan will serve as a stepping-stone for your business. You will need to convince the lender (with your financial statements and cash flow projections) that you are able to repay the loan through the expected long-term profitability of your business.
What will you do if you don't get the loan?
Let lenders know that rejection will not discourage you from starting or growing your business. You want to portray a confident and determined personality and you will try lender after lender until you receive the money you need to get your business moving.
As a small business owner, you will need a certain degree of fortitude. Be confident and proud of your venture. Let lenders know you are in control and know what's best for you and your business. Understand that lending institutions need to make loans. But if you don't get one, don't get discouraged. Ask the lender why you didn't get the small business loan. Learn from the answer, move on, and try other lenders.
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HOW TO BE SUCCESSFUL IN GETTING A BUSINESS LOAN
The key to getting a business loan is being prepared and finding the right lender. Know your needs and be able to explain how you arrived at the amount you are requesting. A successful loan application package will adequately provide a financial history of the business. It will also include a narrative background on the company, the principals, and what the future holds. Personal financial statements and tax returns for the owners will be required. Most important are projections that include monthly cash flow projections listing the critical assumptions.
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