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Requirements for a small business loan

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Most small business owners find that at some point they need to seek out additional financing. Debt financing (business loans), is the most often used type of financing for small businesses. However, it has become much more difficult to secure this type of business financing especially for small businesses that may not have a extensive credit history or collateral. This makes it critical that when a small business owner goes to apply for a business loan that he or she has all of the right documentation and paperwork prepared in advance. When you have taken the time to make sure that you are presenting your small business (and yourself), in the best possible light you are increasing the chances that you will walk away with the loan that you need. While every lender is different here are some of the basic requirements for a small business loan-

• Start with your credit reports-Well in advance of applying for a business loan you should make sure that you pull both your personal and business credit reports. This way you can make sure that the information that is being reported is correct and timely. Keep in mind that if you wait to take a look at your credit when you are sitting in the loan officer’s cubicle you may find that your loan application come to dead stop because of things you may not have been prepared for on your credit history. The reason you should do this is that fixing your credit report can be a time consuming process so it pays to start early. Finally, don’t make the mistake of not checking your own personal credit as the lender will want to see how you deal with your own money, as well.
• Have a great business plan-Once you know that your credit is fine it is time to get out your business plan and start polishing it. Your lender is going to want to see that you have taken the time to adequately research and write your business plan. It is not enough to verbally share your dreams and hopes for your small business. Your lender will not be impressed by vague guesswork. You need to make sure that your business plan shows that you understand your industry, know who your target market is, and have a clear understanding of where your small business fits into all of that. Your business plan should also include: your business strategy, goals, all financial documents, and a management overview. It is crucial that you do not overlook or skimp on this last item. Savvy lenders know that what they are really investing in is the people who run the business, rather then the product or service that is being sold. You will need to be able to show that anyone who works for you has the expertise to help you grow your small business for the long term. If you are unsure of any part of your business plan there is lots of online help as well as business consultants that you can work with in order to have the best business plan that you can.
• Show stellar financial management-Keep in mind that no matter how great your credit is and how well written your business plan is if your lender does not feel confident that you can repay the loan the chances are slim that you will get it. You will need to be able to show through documentation that you will be able to repay the loan on time and in full. You will need to show the positive cash flow that your small business has. If your small business is a startup or fairly new you may need to show past financial successes, as well.

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