How to Get a Small Business Loan

G0etting a Business Loan

So you already have a small business up and running or you are thinking about starting a business but there is a huge problem. You don’t have any cash to fund it which is really important for any business venture. The most popular way for any small business entrepreneur to get funding is either through the government or our big brother which is the bank. A lot of small business owners always felt trapped whenever they’re in a situation like this because it can be a really stressful phase. You are constantly waking up 3 A.M. in the morning wondering where will you get enough money to fund your business so it can at least survive for the next six months. There is no need to worry though because you are not the first and definitely not the last and in this post you will get the important information you need when applying for small a loan.

Have a proper business plan

You have to have a proper business plan when you are going to get a loan, banks don’t want any half done or messy business plan. Make sure you know exactly what you doing and show them how they are going to get their money back. It should include other important topics your projected revenue forecasts, a well put together executive summary and a proper market analysis.

Business Experience

If you are just starting a business make sure either you or your partner already have business experience, it will make life so much easier. Especially if you are going to get money from a bank where they are always skeptical of where they lend their money.

Business Documents

Make sure when you are applying for a business loan you already have all the right documents. Normally when you are applying different organizations require different documents but the main documents you should always have are the personal guaranties from all principal owners of your business, good personal and financial statements for existing business or the one that you are about to start up and your cash flow projections for at least a year or two.

Good personal credit history

This is sometimes where a lot of persons usually get caught up, having a good credit history is always a must and it helps build trust between you and the lender. It shows them that you are very responsible and is a financial literate person. Make sure you also have a well copied document of your credit report before you apply so you can show them how good you are. If on the other hand you are on the other side of the boat where it is not so good you got to spend the sufficient time to fix it before you go and apply for a small business loan with bad credit, it may take some time but through patience which is a useful business skill you will pull through.

Approach banks or lending institutions you have worked with or you are a current customer of

This tip can carry you a long way, it can be good to have a long time relationship with your bank months or even years before you apply for a loan. This will allow them to see your financial activity in your bank account over a long period of time and that can count as metric they can use to validate you as a very financial literate person who knows how to handle their money properly. So when you are applying and they look at your bank account data and analyze it they can give you the green light.

Choose your Lending Institution

Choosing the proper organization is always important, look for banks that persons you know have went to and get a business loan that’s in your range or close to your range of funding. Normally big banks will reject small business loans of a certain nature so it can be pretty difficult getting business loans from them. You can try to explore community banks and credit unions which can sometimes be way easier than those large mega corporations.

Carefully read through and understand your loan agreement

Some persons usually get burned by certain institutions when signing a loan agreement, and usually it’s a not the institution’s fault. They either don’t read through it properly because in the back of their heads they are saying that there is too much unnecessary information and they just want to get to the juicy part which is the signing the deal and get it over with. You have the others who claimed that they read through it properly and kind of overlooked a certain important area. You need to do your research to educate yourself and make sure it’s at a good interest rate. I would advise you to get a financial adviser to talk to about it along with other sections of the deal before you proceed any further with that organization so that it won’t affect your business in the long run which can be pretty detrimental for any small business owner.

Make sure the loan size fits your company’s current status

You can at times apply for too much or too little money and this can sometimes be a real business 101 mistake that persons tend to make time and time again. We all know at times that business can be unpredictable. We can apply for this amount of money and then in the grand scheme of things a new competitor jumps in the market and wants to drive down prices to shut out the competition including you by selling the same products or offer the same services that you offer at cut throat prices to shut you down. Some extra sum of cash could really carry you a long way by using it to compete with that business by offering some other unique products and services. You can even use it for marketing to help build your brand which can give you unique advantage in your market.

So make sure when you are applying for a loan you know your current business status and you analyze your market properly and the money that you are applying can work well in accomplishing your goals for the long term. There are many types of loan sizes you can apply for as a small business owner, for example if you are going to a bank to get cash the typical sizes are between $130,000 – $140,000 with the highest maybe around $250,000. You can even get as little as $5,000 which is called a microloan to as large as 5000,000 which is usually the largest you can usually get.

Businesses can be really hard at times and we all are going to need money at some point especially if you are not profitable or you want to expand. Getting funding can really make life much easier and give you enough fuel in your business’s car to drive you towards your destination. So I hope these tips are useful and all the best in your funding.

How to find investors to finance your business

business financing

Companies are struggling in these tough economic times. Capital is hard to come by, limiting business growth. This also limits product output and thus leads to less consumer spending. It is crucial that you, as a business owner, understand where to find sources for raising capital so that your business will continue to thrive, despite the recession. Finding and providing capital to new and established businesses are a challenge.

Businesses produce a valuable product or service that can be seen in action. Stocks and bonds, mutual funds and other financial products exist mostly on paper. By convincing potential investors of the benefits of putting their money in business rather than in the volatile markets, you have are already ahead of the game. Some companies specialize in bringing together investors and entrepreneurs in need of financing.

For newer firms, finding an investor ready to take a chance on you, especially in these less than stellar economic times, can be hard. The better prepared you are, the higher your chances of ensuring. Make sure you have an accurate business plan and be able to show you are following this plan. You must demonstrate on paper that you are financially sound and ready with a backup plan in case you need one.

Larger or more established businesses should find it easier to raise money. These companies have a history of being fiscally sound and fruitful in their field. You should already have contacts for potential capital investors within your customer or supplier base. Banks are much more willing to loan to long-standing companies. Bootstrapping, or finding ways of raising money by cutting costs within the enterprise, is a viable and proven method for larger firms as well.

When looking at all options on how to increase capital for your business, do not neglect the Internet. There are several options available, including companies that specialize in marrying capital investors with businesses in need of capital. Funding Store is a UK based website that has a list of companies that investors can research and possibly invest in. Even social networking sites such as Facebook and MySpace can help both investors and businesses find each other.

It is easy to cling to the past when attempting to survive in these uncertain economic times. This could be a mistake for the business owner. You need to be flexible and willing to take risks on newer, more unique ways of raising money. As the old proverb goes, “Nothing worth having ever comes easy.