Every business owner looking to start or expand a business wonders how to get a business loan.
This is usually the most common need for ongoing businesses. The loan
can either be used as additional operating capital, financing an
expansion or for many other purposes. A business loan can be taken from
a bank, private investor or even a friend. Regardless of whom you
approach for the loan, lenders will surely have the same expectations.
Preparing to meet those expectations will significantly increase your
chances of securing a business loan.
What You Need To Secure a Business Loan
thing you must do is get important documents together. These documents
should convince the lender that the loan is necessary and also that you
are a good risk. Here are two important documents you will need.
- Business Plan - Presenting the lender with your business plan will not only show why you need the business loan, it will also show what you plan to accomplish with the finances.
- Projections of Cash Flow - The most important thing every lender wants to know is whether you will be able to repay the loan. Providing cash flow projections of your business will give the lenders concrete financial data that can be used to assess the risk.
Personal Financial Status Proof
You may even
have to provide lenders with a complete list of your personal debts and
assets. This will give them a fair picture of your current financial
In addition to this, you may also have to provide lenders with additional documents like past business tax returns and credit rating reports. If your business is already established, showing lenders your business tax returns can give them a better idea of how well your business is doing financially.
It is important for you to consider the point of view of the lenders while making your presentation. There are only two answers that these lenders are looking for:
- What you will be doing with the money
- Whether or not you are a valuable risk
You will have to come up with the right answers to these questions if you want your presentation to be successful.
Collaterals for the Loans
lenders may also want to know what collaterals you are willing to offer
for securing the loan. Collaterals are tangible assets like a house,
car or other valuable equipment you are prepared to put up if you
cannot repay the loan. Proceedings from selling these assets will be
used for repayment.
Lenders may also want to know if you are willing to risk part of your money and how much of it in the business. An affirmative answer will prove to lenders that you are committed to the company. They will also want to know about your expertise, background and aspirations as it will have an impact on the success of the business. You must be prepared with all this information as it can play a big role in securing a business loan.