Are you starting a new business? Do you need a loan for your current business? You may be considering applying for a small business loan. Getting a small business loan is not always easy but there are things you can do to increase your chance of getting approved for the loan.
(1) Before meeting with a lender it is essential that you have a complete and detailed business plan. The business plan will detail your business or your proposed business and what services and/or products you will offer. It also details your target market and expected revenue and profits.
(2) You can help yourself prepare for your meeting with lenders by practicing your answers and explanations to coworkers or family members. This will help you be organized and make sure you are ready to answer any questions and provide information a lender may have.
(3) You will then need to consider how much money you will need to borrow and how much of a monthly payment you can afford.
(4) Be prepared to provide the lender a good explanation of why you need the loan. What will you be using the loan for? If it is a new business, of course, you should be prepared to explain your anticipated start up costs. For loans to help with a current business; be ready to discuss why you need the loan. For instance, do you need to purchase more equipment?
(5) Next, have a plan of action of how you will repay the loan. If you can show the lender that you have a solid and viable plan in place for repayment, this will increase your chances of being approved. You may, for instance, explain that with the new equipment you purchase with the loan, an estimated 20% increase in profits can be expected. Perhaps of that 20% increase, 10% will be used to pay back the loan.
(6) Another thing you should do before you meet with potential lenders is to consider what collateral or security for the loan you can offer.
(7) Current business owners should be prepared to show the lender three years of financial statements. This will show them how well your business is doing and give them a chance to determine if you may be a good lending risk.
(8) Be ready to provide is your accounts payable and accounts receivable information. This will allow the lender to examine the debt you have as well as the money that you have coming in to the business. They will be able to have a good idea as to how well you would be able to repay your loan. You will also want to provide your principle financial statements.
(9) Have your management accounts ready to show a lender. If you are using accounting software, you can print them directly from your software. These accounts are usually produced on a monthly or quarterly business. They can show how well a business is managing their money.