An essential for starting a personal business is applying and qualifying for new business loans or an sba loan. There are many banks and creditors out there who are willing to help, but some are just as willing to turn you down. Where do you start? What do you need? How much time will it take? Several steps should be taken to ensure that you qualify for your loan, criteria that banks look at when considering your application.
Have a Strong Credit Score
When you are starting a small business, you essentially have no credit to your business name, so presenting a strong business credit could be tough. However, there are a few things you can do that will work in your favor when applying for small business loans (or new business grants).
Make sure your own personal credit is strong. As the business owner, banks will see that you have been wise with your personal money and that will affect how they think you will use your business money.
Apply to a couple business credit cards; use them to make purchases and pay them off on time. This will boost your credit score right away.
Remember to continue to build your credit, even after initially getting your first loan, by paying off all bills on time. This will ensure that you will be able to qualify for a loan later if you need to expand your business.
Personal Experience and Education
In some cases, banks will look into your personal job experience or education. If they feel you do not have the right education or experience, they will not give you a loan.
Make sure that your business experience and education is very clear. Get recommendation letters from professors or past employers to back up your claims.
If you do not have the experience or education in the business you want to go to, you may want to consider working for someone else or going to school first in order to ensure that your business is successful.
Have a Professional Business Plan
When submitting your loan application, it is very important that you detail your business plan to the loan office. Make sure it is very professional and very clear. Banks and creditors will take your application more seriously if it is understandable and will be more likely to offer you a loan.
After making your business plan you will have a better idea of the amount you will need to borrow from the creditor. Make sure that the amount is a reasonable sum and that you would be able to pay it back on time.
After the amount is determined, decide whom you would like to approach with a loan application, whether a bank, another creditor or the Small Business Administration.
Make sure to include all company assets and equity you currently have on the loan application, as well as what your estimated expenses and gains will be over the next year.
After all the information is complete, contact the creditor or bank and schedule an interview or fax it to a bank representative. Speaking to someone in person would be beneficial so that they could ask you any questions they have about your application.
Applying and Receiving small business loans can take up to several months, but if it is done right, it could help boost your business.