So you’re getting those ducks in a row, gathering the business filing paperwork, and looking into business loans (here) so that you can get your entrepreneurial dream off the ground. But wait… before applying for a business loan, here are a few things you should know.
Have a Quirky Business Product? Chances are It Will Be Harder to Get a Loan.
It is possible to get a loan for something non-traditional or completely revolutionary. That being said, don’t be surprised if lenders are hesitant to finance a product that doesn’t already have a demand in the market. To circumvent this concern, you’ll have to supply them with a package that includes a business plan, financial projections, as well as competitive and market analysis to provide enough information to make them confident about financing your business venture.
A Startup Company with No Previous Business History? You’ll Need Some Collateral.
Banks want to hedge their risks so they don’t lose out on money if your product fails. Collateral can consist of a personal asset such as a home, a business asset such as equipment, or product inventory. Each lender has their own requirements in this category. Some of them ask for a blanket lien on business assets or a personal guarantee to pay back the loan.
Have Incomplete Financial Statements? Lenders Will Show You the Door.
Having all the business numbers in your head to recite to the lender just doesn’t work. You’ll need complete financial statements down on paper, hopefully audited for accuracy, before applying for a business loan. Gather together your accounts payable, accounts receivable, balance sheets, personal financial documents, and tax returns for at least the past 3 years.
Review Your Credit History Before Applying for a Business Loan.
Credit history and scores affect loan approvals and the given loan amount. Clean up your history and work towards improving your credit as much as possible. Do this long before your start applying for a business loan so that when lenders review the information, they will be assured that you are a responsible business owner who’ll pay back their money.
Applying for a business loan can allow you to reach your entrepreneurial dreams. Proper preparation of your business documents and researching lenders is an essential step on that journey, so make a concerted effort. It will increase your chances of getting the financing you need to succeed.