When starting up a new business venture, many people find themselves needing a good bit funding to get things rolling; the main source of this starting capital is the small business loan.
Let’s take a quick peek at what you should expect when applying for a loan.
Before anything, you should know that vast majority of lenders have their doubts when it comes to loaning funds to a 1st time business owner. As a new business owner, you will be considered a high business risk, and there is really nothing you can do about this. Because of that, you should be sure to position your business correctly before the loan negotiations begin. The best option, of course, is to run your new business for a couple of years out, of your home if necessary, so that you can generate a good record of profitability in your business before ever even seeking a loan.
Your track record
Being able to show that track record of revenue demonstrates your ability to pull income and that your business won’t fail before your sign is even hung on the building. In case you are unable to wait that long and you absolutely must have the cash before you can take your business from the concept stage to an operational business, then chances are you will need to offer some type of collateral in exchange for funding. The collateral can be anything from your home, car, boat, or any other valuable property. Depending on the size of the loan being sought, it may be required that you put up some pretty hard assets for collateral. Your lender is not really interested in whether or not your business will be able to create a cash flow beyond the amount that you are required to pay back to them in accordance with the terms of the contract. A lender does not want you to default on the loan, so you will need to be able to back up the funding should something go awry.
Backing up your loan with assets is a good route to take if you have enough confidence in your business planning to ensure you are not going to lose your collateral. Another option, if you are unable to provide enough collateral for your loan, is to find someone willing to cosign for you. The odds are that are you will not get as much money as you would had you been able to put up enough assets. However, having someone with a high credit rating who is willing to cosign your loan and vow to pay if you are unable just may be the factor that gets you a lender’s approval. Also, this can be a great way for friends and family who truly believe in your business to help get your business started even if they cannot help you with funding up front.
Before filling out a loan application, do a little comparison-shopping among the lenders available to you, and keep going until you find the lowest interest rate possible. Accepting a loan is already a bit of a gamble, so to minimize the amount repaid, be sure the lender you choose offers you the best rate. If you can’t get enough to cover the start up expenses, it may be a good idea to borrow part of the cash from a friend or family member if you can, or even asking for investors, such as customers who believe in your product or service. Never accept a high-rate, high-risk business loan just to increase your level of funding.
To learn about what you can do to greatly increase your odds of getting approval on a loan, please visit GetBusinessFunding.org and get a free information package featuring thirteen different areas of your business.