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Tips for getting a startup business loan

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One of the major obstacles confronting a new business owner is how to get the money they need to open their business. While you may have a great idea for a business, and lot of fresh enthusiasm, it can be difficult to get the funding you need. Many lenders have become highly reluctant to give business loans, due to the current economic conditions. One of the major difficulties that prospective business owners have to get by is the fact that they cannot offer the lender, any business history. Generally, lenders will look carefully at a business' history in order to determine if they are a good risk, for lending. However, you can still get the money you need, if you are willing to put in some extra effort and time. Here are some tips for getting a startup business loan-

  • Show the lender you know what you are talking about-One of the best ways to do this is by preparing an analysis of your market. Keep in mind that this is not an overview. Your market analysis need to be both detailed and thorough. This should be included as part of your business plan, that you will be giving to the potential lender. Your market analysis should include, but is not limited to: a complete overview of your target market, an examination of your competition and an analysis of current market conditions. You will also need to be able to show how much of the market you can capture and what that will mean in cold hard cash. It can be helpful to show comparisons to other businesses that are in your market. Finally, you will need to be able to develop income, expense and cash flow projections, with a fairly high degree of accuracy. If you are thorough with your market analysis this can go a long way, toward convincing potential lenders that you are a good risk, for a business startup loan.
  • Be able to show where the money is going-It will not be enough to say to your lender that you will be using the loan to open your business. You need to be able to show exactly where the loan is going to be used. While this can seem tedious, budgeting out your potential loan can also help you determine a realistic amount to borrow. Working on your business will give you a chance to see exactly how much things will cost. The bottom line is that if you cannot justify how you are going to spend the money, the chances are high that you will be rejected, for your business loan. The closer you can come in determining exactly how the money will be spent, will increase your chances of getting the money you need.
  • Convince the lender you are the right person-Lenders understand that they are not really investing in the product or service that your business will offer, but rather the people who will run the business. This makes it extremely important to show that you and anyone else who will be managing the business, has the expertise and experience to do just that. You should show that you know what you are getting into and that you know how to manage the problems and crisis that will occur. Keep in mind that this means that choosing to open a business that you know something about is crucial. While opening a bakery may seem fun, if you have never stepped into a kitchen before, there is little chance that you will receive a business startup loan, from your lender. Finally, as part of convincing them you are invested in your business, you should be prepared to put up collateral or pledge personal assets. This shows your lender that you are personally investing in making your new business a success.
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