Must-Read Advice on Getting Approved For a Business Loan
Even in a good economy, banks are selective in administering business loans. Bankers want to feel certain they’ll recoup the money. In today’s lackluster economy, getting a business loan can be an all-out battle. Here are some tips and tricks to prepare yourself for the fight.
1. Develop a Solid Business Plan
Never walk into a bank without a complete, thorough and detailed business plan – in writing. Develop a strategy for exactly how you plan to make enough money to pay back the bank, and detail that strategy in your business plan. Try to imagine some of the tough “what if such-and-such happens” questions a banker might throw your way and address them. Anything you can do to make the loan seem like less of a risk will bolster your chances.
2. Tap Local Resources
There are myriad resources available to startups and small businesses, many providing free advice on how to get a business loan or help crafting a business plan. The U.S. Small Business Administration has small business counselors in every state, and the agency offers loan guarantees. Or, you can tap SBA’s partner organizations, including SCORE, a network of entrepreneurs who counsel budding business owners; one of about 100 Women’s Business Centers; or one of about 900 Small Business Development Centers at local colleges and universities.
3. Think Outside the Box
Consider all of your options. If your cash needs are short term and you don’t want to put up collateral, consider exploring an unsecured loan. They often come with high interest rates, but they’re better than credit cards for smaller purchases. Also, don’t rule out smaller lending institutions – local banks and credit unions are often more willing to lend to small businesses or startups than big banks.
4. Review Your Credit History
Believe it or not, your personal credit history has a lot of influence over whether you get a business loan. Pull your report before you seek a loan using AnnualCreditReport.com, a site set up by the three major credit reporting bureaus. You are entitled to one free credit report per year from each of the agencies. If there are errors on the report, report them to improve your credit rating. If your credit is in need of serious work, seek the help of a nonprofit credit counselor.
5. Invest Your Own Money
Budding entrepreneurs are often afraid to invest their own money into a business, for fear of going broke or losing their nest egg. But banks want to see that you’re confident enough about the success of your business to put some money on the line. Don’t wipe out your life’s savings, but certainly contribute what you can.
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