A bank loan could very well make or break your business. Lets say you need the cash flow to support a particularly large influx of orders. Sometimes the only way to fill these orders is with a loan or cash injection. With the order forms signed off by the clients – with definitive delivery dates – you might be able to certifiably ensure that you will be able to pay back the loan, but when it comes to getting approved by a lender you usually have to work a little harder. Even though you have proof of receivables, it is still not your golden ticket. Here is what it takes to secure a bank loan for your small business.
First you need to review your credit score. It might not be good enough to get approved for a small business loan and in that case you will need a cosigner. You can easily go on to one of the many credit-reporting agency’s websites to find your credit score. In addition, you can go through your report to make sure that there aren’t any inaccuracies that are causing your score to take a drop. If there are, have them rectified. Before you actually apply for the loan, you want to be able to have an idea of what you are up against.
Next, devise a solid business plan. In your plan you have to not only include all the ways that you will be able to pay back your loan, but also some contingency plans if you can’t. You should also include all the challenges that you foresee the market might have in store for your business and how to overcome them. The more proof and research you can include in your business plan the better. You want to basically prove to a particular lender that you can not only talk the talk, but also walk the walk.
After you’ve reviewed your credit score and then composed your business plan, you need to start looking for a lender that can offer you the best rates on your loan. Just like you would go to Ratesupermarket Inc. mortgage comparison service to find the best mortgage for a home, you should be comparing different lenders to find the best small business loan. As a small business you don’t typically want to be faced with high interest rates, because this can really put a dent in your cash flow, plus you want to be able to pay back the loan eventually.
Lastly, you might have to prove to your bank that your loan isn’t the only source of funding. This can sometimes raise red flags for banks. They don’t want the loan to be too big of a risk. If you can show that the loan is only supplemental to an investor’s cash injection, the better your chances of getting approved. At the end of the day, getting a loan for your small business is difficult, but not impossible.