Securing a small business loan isn’t as difficult as you may think. It’s not unusual for people to give up their dreams of owning their own business simply because they think that they won’t qualify for a loan. If you’ve got a great idea and want to own your own company, getting a small business loan is possible. Here are five ways to secure your loan:
1.Know Your Credit
When you’re just starting a business, any loan that you secure will based on your personal credit score. Every person is able to pull a free credit score off of the Internet using annualcreditreport.com. Pull your report and look for any errors that need to be corrected and do so immediately. It may be in your best interest to wait until any errors are fixed before you apply for a loan. If your credit score is good to high, you’re in an excellent position to secure a loan. If your credit is fair to poor, you may have to concentrate on raising your score if you want to secure a loan with good terms.
2.Construct a Business Plan
There are very few lending institutions that will give you a small business loan if you don’t present them with a sound business plan. Your plan should lay out your objective, mode of operation and long-term goals. If you don’t know how to construct a good business plan, it will be in your best interest to hire a professional who can help you with the task.
3.Know Where to Apply
Though you can apply at any financial institution that provides small business loans, you may have a better chance of securing a loan with a lender who knows you or an associate. Consider applying at the same institution where you do your personal banking, or with an institution that is recommended to you by a family member or business associate. When you’re applying for a small business loan, who you know can make a great deal of difference in whether you are approved or denied.
Aside from a business plan, you will need to show the lender how you plan to repay your loan. Even though your business is just getting started, a lender will be more apt to give you a loan if you have put together a plan for repayment. If you haven’t yet started your business, gather your personal financial information. Bank statements and tax returns will give your potential lender a good idea of where you stand financially.
Put some of your own money into your business, and ask friends and family to contribute to your company. If you can show the lender that you are invested in your business, they will be more likely to approve your loan. No financial institution will want to foot the entire bill. Show the bank that you have other sources of funding and are not putting all of your eggs into one basket.
Securing a small business loan isn’t very different than securing a personal loan. You’ll need to make sure that your credit score is up to par, that you have the necessary paperwork and that you have a sound business plan. If you do these things correctly, you will stand a better chance of getting the money that you need.
Kara Glaubitz writes for financing web sites and blogs nationwide. She writes for www.accountant.org where you can find out more about using an accountant for your business.