Folks looking for business loans often feel frustrated by the process, especially if they're initially exploring their options. There are, however, several things you can do to improve your odds of success. If you want to get a business loan, a bank will be interested in addressing these three concerns.
Have A 5-Year Business Plan
When a financial institution loans money to a business, they want to have confidence the organization will be around and paying its bills for at least 5 years. A business helps the bank's loan officer understand how you intend to make that happen. You should explain in some detail what your business does, how you plan to grow it, and what you expect the future to look like in optimal and suboptimal scenarios.
Bear in mind a business plan is also a quality signal. If a potential borrower can't be bothered to proofread a plan or check the numbers, for example, a banker has to consider what will happen to the loan money. Your goal is to assure the bank its investment is prudent, and you can show that by caring about the specifics of the business plan.
Understand the Available Business Loan Programs
Matching your business with an appropriate program is critical. Suppose you have a company with 5 employees. Also, you don't see it growing past 10 people. In that scenario, you don't want to apply for business loan programs that expect you to employ 25 people at the end of your 5-year plan.
Learn what the goals of a particular program are. If you're looking for a microloan for a very small business, for example, ask the bank officer specifically about those kinds of programs. Similarly, if you're working with an organization like the SBA, make sure you discuss your goals with them so they can point you to an appropriate option.
Check the Credit Score
A business has a credit score, just like a person does. Check it. If the credit score looks bad, think about ways to improve it before you explore business loans.
If your business isn't presently incorporated, remedy that. Even if your personal credit score is stellar, it's not wise to have the operation's debts and legal liabilities hanging over you. Incorporate the business so you can build its credit score independent of yours. If you need to lean on your personal credit to back the business, that may be an option. However, you don't want that to be Plan A.Share