There are people who have it lucky with banks when applying for small business loans. Others have it rough, and this article clearly focuses on this subject. The process for getting a small business loan is very lengthy and it can get even lengthier if any complications arise from the application and from the credit committee that is meant to approve your application. Should your application be declined, you will be forced to look for alternative sources of financing for your small business, apply for a second time round at the same place or give up with the loan idea all together. If you adopt these essential tips you might find that they are very helpful in obtaining the small business loan that you need so badly.
Secret #1: Develop Your Business Plan.
Before you go bank you need to have a well thought out and developed business plan. It should clearly display your experience in operating a business and how you plan to operate the business to turn a profit. Your business plan should also have 3 to 5 years of realistic financial projections.
Secret #2: Apply for a Microloan that Generally Have NO Minimum Credit Score Requirements
As a small business owner it’s best to start out with a microloan because they are fairly easier to obtain than traditional small business loans, especially if you have a bad credit history. It’s also good to start out with a small microloan to avoid taking on more debt than you can handle. You don’t want to over-extend yourself by applying for large loans that you may not be able to pay back.
Secret #3: Connect with an Experienced Insider
The best way to increase your chances of getting approved for a microloan is to work with a former small business banker that understands what the bank expects of potential borrowers. Working with someone who has insider knowledge on how business lending works can benefit small business owners that are having trouble getting funding on their own. Former small business bankers understand the banks underwriting (i.e. lending) criteria; therefore they can help you prepare yourself better before you go to the bank.
Other Important Tips for Getting Small Business Funding from a Traditional Lender
Tip #1: Building Relationship with Bank
The first instrumental tip in getting your small business loan is building a relationship with the bank or alternative financial institution that you plan on applying for a loan with. You should open a personal account or a business account in that bank whether or not you have already started a small business. Once you do that, strive to be a very good client to the bank. This means that there should be no bank overdrafts, low balances or bounced checks, and consistent deposits. You need to create a good rapport with the bank for yourself or for your business. Inform your bank in good time of any projections, issues or payments that are problematic. Take a small loan and then pay up quickly to maintain good credit.
Tip #2: Offer the Bank Collateral
For every loan that is taken from a bank or other lending institution, there has to be collateral offered up. This is usually just a security measure that the bank takes in case you are unable to pay back the loan. In the event that you cannot pay back the loan, the bank will take up what you offered as collateral and sell it in order to get their money back. So since you have to have something to offer as collateral, take something of great value, even greater valued than the amount you are requesting.
This often reassures the bank and the credit committee that will assess your small business loan application. With that, they will know that you are very keen on repaying the small business loans and that you are very determined to succeed in paying up. Keep all your transactions and documents in check. You will also need to produce certain documents bearing certain information that will be reviewed to determine whether your application is approved or declined. You also need to have good credit so keep your credit in check; if you have any credit debts still unpaid, clear them first.