Three Tips for receiving the best Business Loans
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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