Business owners in every sector are discovering that an infusion of cash is necessary for capital equipment purchases, expansion with new products and services and other business ventures. Financial institutions are willing to lend to borrowers who meet the criteria and have the proven ability to repay the loan. Certain steps are necessary to find success in the attempt to qualify for a small business loan.
Do Your Research
A lending institution that is local and backed by the Small Business Administration could be easier to work with than a major banking institution located in a distant place. Business loans backed by the SBA have a certain set of requirements. Business owners will find more support for the process through the SBA. Speak with bank officers who are aware of the industry and are aware of the business practices followed in the community. Business growth is essential for the owner who wants to borrow funds. The proven success record of the business is a requirement in the process.
Seek Professional Advice
Experts at the SBA are available to work with business owners through the entire borrowing process. Significant amounts of information will be required for the process. Omission of any information will stall the process. Having an advocate at the SBA will reduce the number of times the application is returned for additional information. Various SBA loan programs have been defined for use in different situations. SBA experts know which loans to apply for under various terms.
Separate Financial Records
In the scramble to establish a business, many owners and decision makers will use personal credit for various purchases. Too many business owners forget to separate the personal and business records in the months and years that follow the inception of the business entity. A bank will require that the business have a separate credit history in the business credit bureaus. Personal credit histories are not sufficient for SBA loans. Prior to seeking a business loan through the SBA, the credit history must be established for the business. Separate tax IDs are not the same as separate credit records.
Assemble Your Documentation
A complete set of financial documents will be required to prove to the bank that the loan will be repaid. The first glance at the loan application can seem daunting. Closer investigation reveals that the typical loan application is asking about the income record of the business. The business plan is essential for the completion of the loan process because it reveals the actual roadmap for achieving the stated business goals. Outstanding business obligations are important to the banker because he wants to assess the risk of nonpayment. The approval process will find all credit cards and other loans even if they are not listed on the application. Omissions cause the process to stall.
Use the SBA Checklists
The SBA has created a number of helpful checklists that can reduce the number of missteps encountered throughout the application process. Each of the checklists is designed to answer questions and establish order for the applicant.
Complete the Application
Attempts to complete the application before this point will be futile because the information is not organised. The applicant will learn a great deal throughout the research and documentation-gathering steps. Course corrections must be made prior to presenting the first application to the bank. The first impression will determine how successful the loan application process is in achieving the desired result: loan approval.
Be Prepared for the Interview
A loan applicant must remember that the banking industry holds to many traditions, including professional dress and demeanour. Professional deportment is essential for the business owner who wants to borrow money. The default response to any loan application is “no” until the business owner sells himself and the business plan. Belief in the project can win over the greatest cynic. A well-rehearsed presentation coupled with a carefully completed application will work magic.
Say you live in the UK and are hoping to get approved for one of the loans from Clydesdale Bank. The best time to borrow money is when the business has sufficient cash flow. Bankers will not embrace a business loan application that is intended to help the business simply survive. The business owner must convey how he will lead the company through the entire term of the loan to ensure the cash is available to repay the loan. Solid business plans include the milestones and indicators that will be measured to assure business success. The loan must be secondary to the business operation pursuit of continued growth and success.