How much capital do you need to get a small business loan?

How much capital will you need to get a small business loan? Whether you are a new start up business, or a small business that has been in operation for a while, there usually comes a time when you need to consider applying for a business loan. Naturally it will take some of your own money, but when trying to obtain a small business loan there are a few other important things you will want to consider, and a variety of different options to look at.

Finding the money you need to obtain a small business loan can be a difficult process if you do not know what steps you need to take to get there. Banks, credit unions, and other lending institutions have stated that if they think you are placing them at a potential financial risk they will decline your application for the loan all together. Preparation is the key! The main requirements for obtaining a small business loan are your personal credit history, a great business plan, education, and how possible it will be in expanding your business.

 Credit History. Believe it or not, credit history matters to a banks and lending institutions. If you past credit history is poor, you may want to take some time to improve it, or be able to explain why your credit history is so bad. You want a lending institution to be confident in your financial spending abilities.
 Business plan. The most important part of obtaining a small business loan is your business plan. If you are thinking you do not need one; think again. Lending institutions place great emphasis on business plans. This is where you should include such things as start up capital, financial projections, etc. Most lending institution will generally ask the same questions:
1. How much money do you need?
2. Where do plan on getting the money? (you will need to provide every small detail so they know what their money will be used for.)
3. When and how do you plan on repaying the loan?
4. What will happen if you do not get the loan?
 Education. When I say education I do not necessarily mean a college education. We all know that there are plenty of successful small business owners who do not have a college degree. When I say education, I speak about the knowledge you have about your business, the competition, types of loans, etc. If you do not know these things, do some research.

Small business loans are usually more flexible than many other types of loans but will generally require some specific information and documentation so they can make an educated decision. You will need to have the following documentation for your loan request.
1. Financial Statements. You will need to have documentation of all of your financial statements for at least the past three years and current interim statements. The most important ones are:
 Balance sheets from the last three fiscal years
 Income statements with profits and losses
 Cash flow projections
 Accounts receivable and payable.
2. Personal Financial Statements. This includes previous and current owners, partners, etc.
3. Collateral. A thorough description of any type of collateral you can offer to secure your loan. For example a 401K plan, how much you have in savings, assets, stock, etc. This will help them determine how much capital you need to get the small business loan.

As you can see there is not a lot of capital need to obtain a small business loan, but there is some paper work required on your part, and a little bit of research. Be sure to look into all your options and cover your entire basis.

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