Tips When Applying for a Small Business Loan
When you are applying for a small business loan, lenders look at your credit. Since the business is likely owned only by you, no other factors play a significant role in credit worthiness. Lenders take several items into consideration, with the three most relevant being discussed below.
View your Credit Report First
Before you even complete a loan application it is important to review your personal credit report. If it is not perfect or near perfect, work on correcting the entries by making payment arrangements on larger sums. Pay off small balances first. This will help to quickly improve your credit score.
When a potential lender sees that you are making payments on larger sums, it shows financial responsibility in the efforts to recover your good credit standing.
Have a Specific Business Plan in Place
When you approach a lender for a small business loan, they need to see that you have a proper business plan. The plan should discuss the type of business it is, why the area needs your specific business, the potential for profit and how you plan to grow and market the business. If you have any promotional materials in place, product samples or prototypes, it is ideal to take these with you.
The business plan should be well-detailed, accounting for every penny that you are asking for.
The funding breakdown should include:
• Funds for space rental/mortgage payments
• Utility payments
• Additional business expenses
This should also be detailed enough to be broken down by the period of time these funds would cover upon estimations of demand in the area for your business.
Provide a Detailed Expense Sheet
Other than in the business plan, a detailed expense sheet should be supplied. This is an exact breakdown that includes costs for building if needed, costs of renovating an existing space, furnishing the space, technology and security features that are required and who you expect to contract for these jobs. Their quotes should be attached to this expense report.
When a lender sees that you are fully prepared to run a small business in a specific demographic area, they scrutinize every detail that you provide. There will also be a portion of the discussion that allows them to ask you specific questions about the business, why you want to start it in a certain area and what you plan or wish to achieve by bringing the business to that area.