Buyer Guide to Business Loans
10 Things to Know About Small Business Loans
1. Get Your Ducks in a Row
Straightening out your personal finances (saving up your own money, increasing your credit score, paying off other debts) will help show financial responsibility to prospective lenders. A virtual assistant can help you get your business organized and ready for the loan application process.
2. Know Your Business Plan
Knowing the in's and out's of your business' structure, sales forecast, and other aspects of your business plan will impress upon lenders that you are serious and you know what you're doing. Think about it. Would you give money to someone who wanted to start a business without knowing their target market? You wouldn't and neither would a bank.
3. Decrease Your Risks
Make sure your business plan, sales forecast, and other presentation materials convey the fact that you are a low-risk investment. You want to make sure to express that there is a need for your product/service in your area and that you can accurately represent your ability to pay the money back.
4. Have a Purpose for the Cash
A random amount and vague reasoning will not help anybody in the process. You need an accurate and realistic idea of how much money you'll actually need to get going. Cut out extravagance and stick with the basics when just starting out. You can get that entertainment expense fund once you've proven yourself!
5. Propose Repayment
Think about it: If someone asks you for money, but gives you no idea of when you'll get it back, would you lend it to them? By offering a plan of repayment, you'll show lenders that you have a plan to not only get the money you need, but you are serious about repayment means also. A proper sales forecast can help you determine what terms you'll be able to meet.
6. Be Creative with your Financing
You don't always have to (and really, you shouldn't) depend on Banks to lend you money. Suppliers can be sources of financing, too, as restructuring payment terms can help you lower your initial costs. You can also barter with vendors for services. For example, if you are running a coffee shop, you could trade bagels for ad placements in the local newspaper.
7. Keep Lenders Updated
No news isn't really good news after all. Lenders want to stay informed about what is going on with your business, good and bad. It's understandable that every business is going to have its struggles, especially in the onset. They'll appreciate your professionalism and may be able to offer insight on how to fix any problem you encounter.
8. Dress for Success
When going in to apply for a loan, its best to go in looking professional. Looking the part of a successful business owner will only help lenders to envision you as one.
9. Be Passionate
You have to believe in your idea, product, or service and yourself before anyone else does. Make sure to convey that same drive that made you want to go in business for yourself in the firs place.
10. Don't Give Up
If one lender says no, keep moving until you find the one who does. Many successful people were rejected several times before getting a small business loan. For example, J.K Rowling, author of the popular Harry Potter books, was rejected by eight publishing houses before she got a deal. Let other's persistence inspire you to go after your goal until you achieve it. Also, ask any lenders who do reject you for the reasons why. It may help you prepare for future meetings.