What You Need To Know About Obtaining A Small Business Loan
Dan Levenson October 08, 2015
There may come a time when you might need to take out a small business load to help build momentum so you can succeed in the marketplace. Yet, no matter the size of your business, it’s never an easy accomplishment.
It’s easy to blame the lenders for this, but in many cases, it’s usually the fault of the business for not preparing adequately. Business lenders look for specific things that prove they aren’t giving money out for an already doomed venture.
Most of all, you can’t underestimate the amount of documentation you need to provide when working with a lender. Some businesses don’t provide enough information on their initial visit and end up wasting time, having to come back and bring in more paperwork. Or, they may have to take time to find said documentation if not readily available.
But you don’t need to feel doomed to make the same mistakes. You have methods available that can make the process a little easier. Thanks to numerous business organizations out there as well, you can get some help and tips on how to get a small business loan.
Preparing Before Approaching Lenders
The Small Business Association says that being thorough and truthful are some of the key things to getting yourself prepared before even approaching a lender. Part of this requires more than just gathering all of your financial papers, including which bank you go to.
If you try to obtain a loan from a bank you’ve never been to before, it’s frequently a much tougher path based merely on the fact that they don’t know you. You’re better off obtaining a loan from the bank where you do all your personal banking. Most banks try to get to know their customers, and if they already know you well, asking for a loan isn’t like a cold call.
Remember that it’s best to stay away from larger banks since they don’t typically give loans to small businesses. Going to a credit union or a small community bank is better because they’re more apt to want to fund small business ventures. Community banks are generally more focused on locals since they don’t adhere to a corporate structure.
Once you start working with your bank, listen carefully to what they want in the way of documentation. You’ll sometimes have to bring more than you think, including information linking back in time if you’ve already been in operation for at least a year.
The Most Important Documentation to Bring
You already know that you’ll need to bring your business’s credit history with you, though banks want to see your personal credit history as well. Plus, don’t forget personal and business financial statements with complete projections. A detailed business plan is equally essential, and this should include your credentials like education and past experience.
Banks additionally want to know what your cash flow projections are for a year since this is a true barometer on whether a business can stay afloat. Have this carefully delineated in chart form so it’s easy to read. Don’t forget the personal guaranties of your business’s owners.
Afterward, you can expect to obtain around $250,000 at most for your loan based on median figures from the SBA above.
Finding Help Obtaining a Small Business Loan
The Small Business Administration itself works extensively with small businesses on more efficient ways to get a loan. So does SCORE, which the SBA supports. With 300 SCORE chapters across the country, they have counselors who can help you deal with the complexities of small business loans.
If you feel overwhelmed by the prospect of taking out a small business loan, don’t worry. We can help lead you in these right directions related to loans, insurance, and other business documentation here at InsureYourCompany.com.