In order for a small business to get off the ground, or to keep operating, it must have financing which is often in the form of a business loan. One form of small business financing is debt financing. Small businesses can apply to banks or other financial institutions, like credit unions. for commercial loans. Usually, banks do not make loans to start-ups. but they do make loans to ongoing businesses. These are the major steps you should follow through the loan application process.
1. Reason for and Amount of the Business Loan
2. Visit Your Local SCORE and SBDC Offices
Especially if your business is a start-up, you may want to get some advice and help from experienced executives. If you have a chapter of SCORE in your area, they are a wonderful and free source of advice and help. SCORE is a non-profit, volunteer group of retired business executives. If you don't have a local chapter, you can get online advice and online counseling. You may also have a local chapter of the Small Business Development Center (SBDC), particularly if you have a nearby university. The SBDC is part of the Small Business Administration (SBA) and exists to help existing and new small businesses. It will help small business owners with the application process for a small business loan.
4. Start Reviewing Your Borrowing Options
Look at the commercial banks available to you. Don't just go to the large, national commercial banks.
You may have a better chance for a loan at the smaller regional commercial banks.Other non-bank institutions might be options for you such as credit unions. If you are a member of a local credit union. talk to the loan officer there about your need for a small business loan. If they make such loans, pick up a loan application there as well. There are other options such as microfinance loans that make loans to startups. If one lender turns you down, another may say yes to the same loan application so keep trying.
5. Prepare Your Business Plan
This may be your most important step. In order to get a small business loan from just about any lender, you have to prepare a good business plan. In fact, until you have a good business plan, chances are you won't even know how much money you need or how fast you can repay it. The business plan is in addition to the loan application required by the financial institution. Business plans consist of many parts. A good business plan will have several years of past and project financial statements for your business. It will include a statement of collateral or the type and value of assets you will use to secure the loan. You will need to include an analysis of the market your business will serve as well as a statement of your own experience.
6. Plan a Presentation and Make the Appointment
Category: Personal Finance