It is not uncommon for a small business to get a business loan at some point. Some small business use the loan for startup and others use loans during times of expansion or financial crisis.
Regardless of where or who you intend to get your loan from, there are a few things that can help lock in your chances for your loan approval.
Being prepared for a loan meeting will help you increase your chances of getting to the ‘Yes’.
Create a Business Plan
Having a business plan makes you appear more professional to potential lenders and investors.
A business plan not only shows them why you need the loan, but it also shows them what you intend to do with the loan should you get loan approval.
To write a business plan, you should start with a detailed and compelling description of your business. It should also have an overview of the industry and a market analysis. The plan should include a marketing plan and a management plan.
Additionally, it should have a financial outline and operations plan.
All of these things will help ensure potential lenders that you understand the industry and have what it takes to be a success.
Naturally, when someone plans to lend you money or invest in your business they will want to know if you can repay them.
If you provide them with cash flow projections it will give them a firm idea of when they can expect repayment. It also helps them determine the risk involved with lending you the money.
You can draft these documents on your own, or hire an accountant to help you with them.
Personal Financial Statements
When you need to get a business loan to start a small business or you need money to invest in your current small business, a lender will want to see your full financial picture. This means that they will want to see proof of your personal assets and debt before you can get loan approval.
This helps them determine the level of risk they are taking in investing in your business or lending you money.
When trying to get a business loan, there are a few other documents that lenders usually want to see before they place the stamp of approval on your loan. Having these documents readily available before you are asked for them shows a level of professionalism and may help speed up the process.
Get copies of your past business tax returns if your business is already operational. This will help the lender determine how you are doing financially. Additionally, they will most likely require them – so it is good idea to have them readily available.
Having a copy of your credit report and your credit rating is important as well. You need to have established credit in most cases to get loan approval. Generally, most financial institutions base approval in part on your debt repayment history.
You don’t need to bring this copy to your loan meeting with a prospective lender or investor. However, they will most likely check it on their own. So get a copy for yourself and make sure you clear up any negative marks prior to your loan meeting.