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Business Finance: How To Apply For A Small Business Loan

March 12, 2011 by · Leave a Comment
Filed under: Business, Finance 

Obtaining money such as a loan or investor funds to start up or run your business is one of the most difficult tasks a small business owner will face.

When starting your own business you may be able to make use of your personal savings, or you may borrow some money from family and friends.  Nevertheless, there will come a time that you may need to go out of your immediate circle and enter the business finance arena to obtain a small business loan.

To minimize the difficulty in obtaining funds, you need to take the necessary steps to prepare for a small business loan.  It is important to learn other options and other business finance products and alternatives and know how to seal the loan deal.

In view of the fact that banks consider small business loans risky, you have to consider other business finance options and be prepared before you approach your loan officer.

Listed here are the five issues the bank will consider when you apply for a small business loan.

Your Personal Credit History

As a small business owner you need to keep in mind that your personal credit history plays an important role in your ability to attract financing for your business.  Before banks and other financial institutions will lend you money, they will look closely at your credit history and credit score.

How Much Money Do You Need?

Next, you need to estimate how much money you will need to operate your business.  You need to estimate how much you need for inventory, payroll, manufacturing expenses, supplies, real estate and miscellaneous assets.  You need to be accurate in your estimation so that you can request sufficient funds to invest wisely.

Good Business Plan

Preparing a business plan is the most important task to obtain a small business loan.  The business plan must tell the lender what the business is, why it is feasible in your area, and must answer the questions a lending institution would ask.  To develop a business plan you need to do some research or you may consider hiring a planner or an accountant to help you out.

The Profitability Of Your Business

You should be able to convince your loan officer that your business will be profitable and that you will pay back the small business loan in a timely manner. For this task you need to use your forecasted financial statements.

What Will You Do In Case Your Loan Is Not Granted?

This is one of the last questions that the loan officer will probably ask you.  Always be prepared to have a good answer for this question.  Let lenders know that you will try other lenders and programs that will cater your needs and that rejection will not discourage you from starting and growing your business.

Bear in mind that you may have to try several lenders before you succeed in obtaining a small business loan.  Be confident and positive; don’t get discouraged as you can surely find one that will grant the loan that you need!

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