A business loan is specifically targeted to financing your business, whether it is the initial loan to pay startup costs or a later loan on the existing business. Business loans can be used for a number of things, including expenses, new equipment, expansion, or as a debt consolidation loan.
In the current economy, getting a loan for anything is tougher. Let me give you a few tips.
Tip Number One
Spend time on the paperwork. The requirements for getting a business loan may vary a little from lender to lender, but they will all want a package that tells them about your business, how much money you want, and what you plan to use the money for. But everything starts with paperwork.
Make sure you have a neat, data rich documentation that will give the lender the information they need to grant your loan and asses a specific loan repayment plan. The creditor will want to know how much money you need and what it will be used for. They’ll want the business plan to include the planned contingency options if things don’t go as you’ve projected.
Creditors will look at the businesses’ credit report and/or your personal credit report. The better your FICA scores the better chance you have to get funding. But don’t forget the paperwork. The more thought out, confident and concise you are in the required paperwork and in person—the better chance you’ll have of securing the loan.
The reverse of this is if you go into the loan process with incomplete, missing, or disorganized paperwork—you are liable to delay the loan processing and ultimately take a risk of being turned down for the loan just for your lack of preparation. Money is tight and lenders have lots of applications on their desks. Don’t make it easy to pass you by because you aren’t prepared.
Go online and do a search on ‘sample business proposal.’ There are templates and samples that have been filled out for other companies. Look at them. Compare and contrast what information has been included. The better your proposal, the better chance you have.
Tip Number Two
Don’t assume the lender understands your business. Write your business plan and data sheets as if you are explaining your business to someone who has never heard of your company or industry. 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 the enemy. Spell out the terms and be sure to include definitions of any word that is industry specific. Make the plans and data understandable by anyone.
Have someone outside the business read the plans and information. If your reader truly has no understanding of your business, they can read your plan and proposal and point out confusing terms, as well as anything they don’t understand. Having a reader will give you the opportunity to make clarifications before you present the loan documentation.
Tip Number Three
Don’t ignore the 800 pound gorilla in the room. Make sure your business plan addresses risk in the application. There is no business without risk, the lender is going to ask about it, don’t try and pretend it doesn’t exist. If you do, the creditor will think you haven’t thought about it and are ill prepared.
The lender will want to know you’ve considered the major risks and what you’ve planned to do about those risks. You can’t plan for every contingency, nor should you try and include every known risk in your business plan. But you can show that you’ve thought about the possible pitfalls and are prepared to handle the major ones with an eye on changes. If you don’t know what the risks are for your industry, you definitely need to do some research and figure it out.
On the reverse side, what happens if your business is a huge success? If everything explodes and the demand for your service or products is off the charts, then what do you plan to do? Make it realistic and show that you have a plan for everything in your control.
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A business loan is a loan you get specifically to finance your business. It can cover the initial, startup costs or a later loan can be used to fund expenses, new equipment, expansion, or as a debt consolidation loan. These are just a few things the loan can be used for.
News – Banks Are Supposed to be Lending More
In November of 2009, the US Treasury released a report saying that they were encouraging banks to start making more loans to small businesses. Several economists are predicting that we are at the bottom, or near the bottom for the amount of loans made every month. Many financial institutions attended a recent White House Forum on business loans and they pledged to increase Small to Medium Business Loans in the following year.
Do you know what the government offers?
The US government has a loan website. The website address is www.GovLoans.gov. This is a good place to start if you are looking for business loan information. It will give you information on eleven government agency loan programs and there is a list of agencies that can provide information and assistance. At this site you can take 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 stated purpose of the U.S. Small Business Administration or SBA is that it is an organization that, “aids, counsels, assists, and protects the interests of small business concerns, and advocates on their behalf within the Government.” There are specific programs to assist victims of disasters. Besides 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. One of the links will help you determine if your business meets the SBA’s regulations to be considered a small business.
There are resources to help a business prepare a loan proposal. They give a list of things that might be required when you apply for a loan. There are also resources to consider if you are thinking about borrowing money.
In Other Resources you will also find a list of Certified Development Companies that can help you get a long term loan to acquire fixed assets. This is called the 504 loan program. There is a link that will give you a list of SBA Preferred and Certified Lenders that work with the government to loan money to small businesses.
For loans less than $35,000, there is information on the site about the SBA Microloan Program. Once you’ve looked at the program, if you are interested in getting a loan there is a link to specific, approved lenders that are in your area.
This government website also helps you find an investment company if your business needs equity financing. Again there is a link that will take you to a list of companies that provide equity financing and are approved to work with SBA.
The SBA website other resources will also link you to information on SCORE – “Counselors to America’s Small Business.” This association is a non-profit organization that has thousands of volunteers focused on counseling small businesses and training those businesses through there chapters, branches and the website.
If you are starting a new business, there is a link specifically for you that will provide all kinds of resources and information targeted to startup companies. These sources will assist you from the beginning and help you develop and grow the new company. There is also a Development Center program that supplies management assistance to both individuals and small businesses. This Center offers a varied of information and guidance that comes from a conglomeration of federal, state, and local government, as well as the private sector. They also offer technical assistance.
There are over sixty separate federal organizations that are out there with the charter to assist or regulate business. To help navigate these agencies and resources for funding, grants, and all kinds of help…the US Business Advisor is a one-stop electronic link that will help you find the information or help that you need. There is a link to the US Business Advisor on www.govloans.gov.
With so many resources in one place, you need this link at your fingertips. From loans, to a check-list for preparing for those loans and many other services, this is all free help and advice.
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