Starting or expanding a business often means applying for and getting approved for a loan or a business line of credit. The process may seem complicated and overwhelming, but it doesn't have to be. The following are five tips for getting a business loan.
1. Check Credit Report and Scores
Everything from a low credit score to inaccuracies on a report can decrease your chances of loan approval. Your credit report needs to be checked before applying for a loan. That way any inaccuracies can be disputed and removed. Creditreport.com states that a credit score is important because it is used in the process that determines the amount an individual can receive in a loan and the interest rates that are paid.
Writing a detailed business plan is a crucial part of obtaining a loan.
2. Write a Great Business Plan
A business plan is an overall outline of what the business is and how it will run. It usually includes describing the product or service your business is promoting, marketing analysis, and the organization and management of the business. If you're passionate about a business, you should be able to express this enthusiasm in a business plan. According to inc.com it's important for loan applicants to be able to tell why their company needs money and why a lending institution should approve their loan.
3. Go Local
It's important to choose a lending institution that cares about and is invested in local communities. It may be easier to get approved if your business is located in and contributing to the same community the bank is serving. Banks that exist locally have a better understanding of the area they serve and will know which businesses will be a good fit for the community.
Take all the necessary steps to make sure the loan is approved.
4. Prepare to Secure the Loan
Those seeking a loan should be prepared to secure the loan before even starting the application process. This is particularly important if you have less than stellar credit. Collateral or assets are usually defined as a form of security that can be used to assure the bank that the person has a secondary way of repaying the loan other than the business. Cash savings is often used as a way to secure the loan. Everymanbusiness.com states that a variety of assets including buildings, machinery, and other types of property can also be used as security for a business loan.
5. Prepare the Details
After your business has your credit, assets, and business plan in order there's still work left to do. Allbusiness.com discusses a few details that need to be put in place if they haven't already been included in the previous steps. It's recommended that a detailed budget be included if it wasn't already in the business plan. Future cash flow projections should also be included. Also list any suppliers or partners the business will be working with when using the loan money.
When preparing for any type of small business loan or commercial loan it's imperative to plan ahead and organize all necessary items before approaching a lender. It's ideal to work with a lending institution that cares about local communities and businesses of all sizes. Contact Seacoast Bank for information regarding business lending solutions.