Top three questions and answers about Business Loans
A business loan is a loan explicitly targeted toward financing your business. The business loan can be a startup loan or the funding can be used on an existing business and to fund expenses, new equipment, expansion, or as a debt consolidation loan. These are just a few things the loan can be used for.
Where do you go to get a business loan?
Start at the top. Go to the US government loan website. The website address is www.GovLoans.gov. This site not only has loan information, but information on lenders, programs and even tools that will help you determine if you are qualified as a small, medium or large business. There is information on eleven government agency loan programs and a list of agencies that can provide information and assistance for applying for these programs. The starting point is a short questionnaire that will determine your eligibility for any of the government loan programs. This site will also allow you to compare options and get general information.
The U.S. Small Business Administration or SBA is a specific organization designed to, “aid, counsel, assist, and protect the interests of small business concerns, and advocate on their behalf within the Government.” If your business was affected by a disaster, there is a program for that. This site provides more than financial assistance. The SBA also provides contractual assistance, and business development assistance.
Under the Other Resources tab on the loan portion of the website you will find a lot of helpful information. No matter if you qualify for a government business loan or not, at this site there are resources to help prepare a loan proposal for your business. You’ll find a checklist of items that you will need to gather and prepare when you apply for a loan. There are other resources to help you decide where to go for bids if you are searching for a loan. These resources include listing qualified and vetted lenders of all sizes.
What do you need to prepare to ask for the Business Loan?
The paperwork varies. But there is paperwork and lots of it. There will be a loan application that asks for specific information. Business and/or personal tax returns and bank statements will be on the list. You’ll need to be neat, methodical and provide everything they ask for. It’s likely a creditor will want you to tell them how much money you need and detail what it will be used for. They’ll want a detailed business plan and look at the appropriate credit reports.
What mistakes can I avoid?
Make a checklist of what the lender asks for and anything else you think will help. Remember the SBA website above has a checklist for putting together a package for business loans. Don’t forget anything. That would be mistake number one.
Keep everything organized. If there is quite a bit of paperwork, it might be a good idea to put it in a small three-ring binder with tabs for the requested documentation. Disorganized paperwork is mistake number two and could delay the loan processing.
Don’t assume the loan officer or lender knows your business or what you’re talking about or have described on paper. When you are putting together your business plan or supporting documentation, be very careful to stay away from using terms that may be well-know to business insiders, but aren’t recognizable by the general public. Acronyms are big pitfalls. Spell out the terms, make sure you include definitions or make the plans and data understandable by anyone. Mistake number three is assuming that everyone knows your industries lingo.
Mistake number four; don’t have someone else read the business proposal and supporting documentation. This is important on several levels. Make your reader someone who has good English and Editing skills, but understands nothing about your business. This way they can catch spelling and grammar errors and spot all the mistake number threes.
Mistake number five is to assume there is no risk. Everything has risk. Walking across the street is risky. Opening a business is definitely a risk. Don’t ignore the risk or the lender will believe you are ill-prepared to run a business.
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