5 Steps to Acquire Small Business Financing
Posted by Guest Author on August 7, 2013 in Business Financing [ 0 Comments ]
Apply for a loan—it’s easier than you think. Though loan applications are practically designed to intimidate, they’re not so scary if you break them down to their component parts. Take it one step at a time, and soon enough, you’ll have a stellar loan application to help you find the lender of your dreams. It may take a few tries, but don’t lose hope! Follow these steps, and any lender worth his salt will see you’re worth investing in.
Related: Business Financing Options to Fit Your Needs [and Infographic]
1. Write a business plan.
Why write a business plan? Consider this hypothetical:
Pretend you’re a bank loan officer. You’re evaluating business loan applications and you’re trying to decide which to approve and which to reject. You’re looking for a business that has a solid idea of what it wants to achieve with the money that it hopes to borrow. A business that has left no stone unturned in its assessment of its financial prospects. A business that has considered every possible risk and come up with every possible solution. Simply put, you want a business that knows what it wants and is fully prepared to achieve its financial goals.
In other words, banks are looking for a business with a great business plan.
2. Determine your financial needs.
When applying for a loan, it’s critical to differentiate between ‘needs’ and ‘wants.’ When you’re asking a bank to lend you money, it’s normal to think too big at first. Sure, what business wouldn’t like to have an extra $1 million at its disposal? But in the lending world, mo’ money often means mo’ problems. Because while it’s easy to dream of the goals you might achieve with a sizeable loan, it can be far more difficult to figure out how you’ll pay it off. Your business may qualify for loans of far greater value than what you need to carry out your business plan. So consider your financial needs wisely, and when in doubt, think small.
3. Research lenders.
Applying for a loan is a bit like applying to college. There are scores of great colleges out there, all with stellar academics, extracurricular options, and more. But you want the right fit. If you’ve got a 2.5 GPA, chances are that Harvard, as wonderful a school as it is, may not be the right school for you. The same holds true for lenders. You want to look for lenders that have a history of working with borrowers with similar characteristics to that of your business. If a lender traditionally only lends to large corporations, it’s likely that it won’t be particularly interested in your small business. Focus instead on local, community lenders, and then branch out from there.\
4. Prepare your documents.
Lenders want to know it all. From your personal background, to your credit history, to income taxes and bank statements, they want to examine every aspect of your business and personal financials. And don’t even think about trying to hide any flaws. Lenders are super sleuths when it comes to digging up holes or inconsistencies in your financial statements. Be honest about your credit and financial history from the start, and lenders will respect you for it. For a more detailed list of required documentation, check out the SBA’s Small Business Loan Checklist.
5. Feeling stuck? Ask for help.
Applying for a loan can feel overwhelming at times. But you’re not in this alone. The US Small Business Administration (SBA) is a federal agency whose goal is to promote small business entrepreneurship in the United States. Their sole mission is to help small business owners like you secure the capital you need to grow your business, so don’t be shy about asking for help.
About the Author: Liz Jacob is a writer for Biz2Credit Business Loans, the #1 online credit resource for small business funding options. Biz2Credit has secured $800 million in funding for small business owners in the U.S. since 2007. Visit www.biz2credit.com and follow @biz2credit for company and industry updates.