How to Secure a Business Loan

If you have an idea for a startup, you will need cash to make it a reality. You can look for investors or borrow money from friends but getting a loan from a local bank is still a popular option.

Before you talk with a bank, there are a few things you can do to improve your chances of being approved. Many business owners walk into the bank unprepared. They also are not realistic about the amount of money they should borrow. To avoid this, here will discuss some tips to help you secure a business loan.

Have a good business plan

A business plan is your roadmap to your business. It defines your business, sets goals, and explains how you plan to meet these goals. On a personal level, it offers a vision and help you oversee your business. On a financial level, it gives bankers a sense of what your business is and how you plan to make a profit.

Being able to present your strategic business plan to your banker will help him or her gain a better sense of the business’s future stability.

Once your business plan is ready, make sure that it answers the following three questions:

• Does my business plan have clear goals and measurable objectives?
• What are my strategies to meet those goals (and do I explain them)?
• What is the competitive landscape?

Identify your long-term business goals

A long-term goal of making money is not enough, you need to have a vision for the future. Your bank wants to understand your plans for growth. Some things to consider are expanding your product line or your company increasing in size in the future.

By presenting your long-term business goals you will help your banker determine if you are able to achieve those goals as well as recommend the right products and services for your business.

Bring the right documents

Before you apply, make sure you have all the required documentation. Locating these files now and having them easily accessible will help streamline the process of getting a small-business loan.

Bring the right documents with you, including your tax returns, bank statements, proof of personal and business insurance, letters of incorporation, registration or trademarks, and any applicable business licenses.

Be prepared to discuss numbers

Know your current cash flow and expected revenue. Your banker will want to know if you currently have a revenue stream and how you are tracking it. You should be prepared to discuss ongoing costs, including rent, utilities, payroll, equipment, and supplies. If your business is seasonal, be prepared to talk about how to get through the slow months.

You will also be asked about your financial contributions. Banks want to know that you have got some skin in the game, too. You will be asked how much money you have invested n your business so far and how much money you are willing to contribute in the future.

The Bottom Line

The proceeds from a business loan can help your business survive a slow season, buy essential equipment, or expand across the globe. Before you apply for a loan, do your research. Identify your business goals and how financing can help you achieve them. By taking the time to research the right loan option for your business, you will improve your odds of getting the money you need.