There are countless rewards in owning your own small businesses, like setting your own hours and spending those hours doing something you actually love doing. If you have a spectacular idea – why not share it with the world? However, actually starting a small business can be a daunting experience and chances are that you might have to take out a loan. Setting up your small business isn’t cheap and the bank in this instance might be your new best friend. There are a number of tips that can help you get approved for a small business loan without all the trials and tribulation. Here are 5 tips to help you secure a small business loan.
- One of the first things the bank is going to do is assess the risk of your proposal for a loan. This means your business plan must be infallible. You must be realistic for every dollar you intend to spend and how much of a return each dollar will make. In that case, you must also include a reporting of how many of those dollars you intend to use to repay the loan, and when. The bank will look at mitigating factors outside the realm of what your business actually does, like projected forecasts for your target market, so you must also show your plans for cost-savings methods in case of a fiscal emergency.
- Another tip is to keep excellent financial records. Most loan programs require that the owner of the company provide at least one year of bank statements. In order to avoid putting up a lot of collateral, it’s best to show that all your financial statements are in complete and good standing order. If you can show your lender that you can keep track of your spending, the higher your chances of securing a loan.
- Credit is another incredibly important factor in your lender’s decision to approve a loan. Whether the small business is a sole proprietorship or a limited partnership, you must prove that all owners have excellent credit. You can check your credit rating with any of the three major agencies, usually for free. Make sure there are no inaccuracies or missing data. Usually if there are mistakes and you can provide the proper paper work, many of these errors can be remedied.
- Banks also want to see that you are willing to do anything keep your business afloat. This means proving that you have sufficient collateral to guarantee and back up your loan. In most cases, for small businesses, this means property with substantial value: houses, cars, and boats – if you own it outright, it can be declared as collateral. If you are looking to take out a large loan with a lot of risk, you can talk to a financial advisor with a reputable name, like Selby Associates, to help you better assess your fiscal requirements.
- You can also secure a loan the old fashion way: by getting to know your banker personally. Ask them what they would like to see in terms of financial documentation. Sometimes securing a loan comes down to the simple ‘yes’ or ‘no’ decision of the banker at your local branch. Provide copies of tax returns, educational background, and proof of a clean criminal record. If you show that you are an upstanding citizen, the better your chances of getting a loan and starting your small business.