Getting a loan is a critical element of either starting or growing a business. However, the ongoing credit crunch makes the process of acquiring an online loan more challenge than ever before. Today, even having a good credit score is not a guarantee that a lender would be ready to finance your business. As such, anyone who goes looking for a business loan need to be prepared for scrutiny and even possible draw-out of the application. This means that to successfully apply for a business loan, one must prepare adequately. Here are some useful tips to help with that:
Prepare a comprehensive business plan
When applying for a business loan, ensure that your application is backed by a detailed, well researched business plan. In modern economies, businesses with great ideas tend to flop so when you do not have a clear plan for success, lenders might not be ready to take the risk. In your business plan, include a detailed market analysis, backed with facts regarding your target audience and the market share you want to dominate. Also, be sure to include your income, expenditure and cash flow projections that are sound and reasonable. Demonstrate your experience and the qualifications you have to succeed in the industry you are in. Through your business plan, demonstrate and airtight case that will indeed you will be able to repay the loan.
Specify financial information
In the financing section of the business plan, be sure to include solid financial details. Provide details on how each dollar loaned to you will be spent. In doing so, you demonstrate to the lender that the loan will be used in an efficient manner. It will also be useful to you because most business overestimate the amount of financing they need, which leads to rejection or unnecessary high interest rates. If you plan to use the loan for different thing, be sure to show that. Your financing section should also contain any financing demands you expect over the next 5 years and the strategic financial plans like potential buyouts and debt repayment schedules. Inform the lender of any terms you want considered and be flexible when negotiating for the loan.
Figure out what collateral you need
When applying for a loan, be ready to provide collateral. In most cases, people use real estate assets as collateral and at times, mortgage, to finance business loan. Have a ready collateral document showing which assets you can use as collateral. Most small businesses include personal savings and college funds as collateral. Placing assets that you own as collateral demonstrates to the lender that you are confident about your business to the extent of taking personal risk. This can encourage them to approve your business loan faster.
Pick the right lender
If you have been watching msnbc live news, you must already know that it is easier to get a loan approval in smaller banking institutions than in bigger ones. The trick of improving chances of getting a loan approval is to approach different financial institutions for loans. Though big banks may be advertising loan products for small business, they tend to have the highest loan rejection rates even when a business has existing customers. On the other hand, credit unions and local banks tend to have higher loan approval rates.