To get a $50,000 loan for a business, the owner of the firm must know how much money is needed, know how creditworthy the business is and find a lender. Yet the process of landing the loan for the business also includes understanding the business’s strengths and highlighting those in a clear business plan and a strong loan application. Patience is required as well, as the following six steps to getting a $50,000 loan illustrate.
Step 1 - Know the Loan Amount and Purpose
Among the first things a prospective lender will want to know is how much money a borrower wants to borrow. Second, the lender will want to know what the loan is for. All considerations flow from these two items.
A lender will evaluate the business’s financial suitability to borrow and repay a loan of a given amount and must know that amount to begin the process. The lender will want to know how the loan will enhance or confirm the business’s ability to repay.
Before approaching lender for a $50,000 loan, determine how much the business needs and what specifically the loan will accomplish.
Step 2 - Know the Firm’s Creditworthiness
Most business borrowers have a credit score with the major business credit reporting bureaus, the chief of which is Dunn & Bradstreet. The score will be from zero to 100, with a score of 75 being excellent. If your business does not have a credit score, you can establish one through a business credit card or an account with suppliers, but make sure your lender is reporting to the credit bureaus.
Depending on your firm’s credit score, be prepared to negotiate
for the best interest rates on the $50,000 loan if the score is good or to account for the low score and be prepared to adapt to it.
Step 3 - Develop a Business Plan
Even with a strong credit score, a lender will expect to see a clear, concise and correct business plan that accounts for your firm’s ability to repay any loans. A business plan should include the business mission, strategies to achieve the mission, tactics to implement the strategies, a measuring system to ensure the business is on track and a current assessment of the competitive environment.
Step 4 - Choose a Lender
If you already have a borrowing relationship, start there. If there are no relationships established, shop among business lenders in your area for the best loan terms available. Don’t limit the concept of “business lender.” Many small firms start out borrowing from accounts receivable lenders, through Small Business Administration loan programs or even from private parties.
Step 5 - Prepare a Professional Application
Often, the application for a $50,000 loan is among the first impressions of a borrower that a lender has. Take the time before filing the application to ensure you know everything required and that you have included it all. Make it easy on the lender. Make the application neat and professional in appearance.
Step 6 - Be Patient
Don’t get in a hurry. Lenders will take all the time necessary to reduce the risk of lending to a small business. If you’ve done your homework, the $50,000 loan should be yours. You are building a relationship, so allow the lender time to check you out.