Things you must do to get a small business loan

Most small businesses find that at some point (whether at start-up or along the way), must financing in the form of a business loan. Whether this is to get the doors open, or to keep operating, it is crucial, for the small business owner to understand the things they must do in order to get a loan. Debt financing is the most common form of small business financing. Small businesses can apply to banks or other financial institutions, like credit unions, for commercial loans. You should keep in mind that usually banks do not make loans to start-ups, but they do make loans to ongoing businesses. These are the major steps you should follow through the loan application process.

• Clearly state the reason for and the amount of the business loan-While this may seem obvious that a small business owner would know the reason for,and amount of the business loan they need, if the business is a start-up, this is not necessarily true. This is because owners of start-ups may only be in the process of determining the amount of funds they need, and why. Because of this business owners, (whether the firms are start-ups or existing firms), need to take some time, and be able to clearly articulate why they need a business loan, and how much they need. Keep in mind that some businesses may not be able to address the question of how much they need, until they prepare their financial statements as part of their business plan. In addition, knowing what you need and how much shows the potential lender, that you consider your business a serious concern. Bottom line-it just looks more professional.
• Carefully review your credit history and credit score-Keep in mind that if your business is a start-up, or less than three years old, your personal credit history will be evaluated, as well as your business credit history. Before you apply for a small business loan, you need to take some time to get your personal credit history in order. You will need to request your credit report, from each of the major credit reporting agencies. Carefully review these credit reports, and if you see any errors on your credit reports, write the agency a letter, and detail the error, and ask for it to be fixed. You should also check on your credit score. A credit score of over 700 is very good, and significantly increases your chance of being approved for a loan.
• Prepare a business plan-This could be your most important step. In order to get a small business loan from just about any lender, you have to prepare a detailed and good business plan. Keep in mind that the business plan is in addition, to the loan application required by the financial institution. Business plans can consist of many parts. A good business plan will have several years of past and project financial statements for your business. It will also include:a statement of collateral, or the type and value of assets, you will use to secure the loan. You may need to include an analysis of the market that your business will serve, as well as a statement of your own experience.
• Plan your presentation-Keep in mind that in order for the loan officer at your financial institution, to give your application, for a small business loan a second look, you have to make it compelling. You will want to prepare a professional looking presentation of your business plan, and application, for your loan officer. You should have a package to hand to your loan officer, with a narrative, plus any financial statements, spreadsheets, charts, and graphs that are necessary. Always make an appointment with your loan officer, and request enough time to do a short presentation, with visual aids, based on your business plan.