You might have a great business idea, but that doesn’t necessarily mean that you have the capital to get it off the ground. You can try to get funds from investors, or you might seek out a business loan. If you decide you’re going to try the latter, then the process might intimidate you.
Securing a business loan is not all that difficult, but there are a few things you should think about if you are going to attempt it. Let’s go over those right now.
You Need a Viable Plan
As you get ready to approach a bank or credit union that gives local business loans, you should know that unless you have a viable plan, these entities will not take you seriously. Your business plan should consist of:
- A detailed rundown of what you plan on producing or selling
- Market analysis
- Competitor details
- Your goals, projected revenue, and expenses
If you approach a lender and present them with a vague idea, you’re wasting both their time and yours. You need an executive summary that will convince the individual you’re meeting that this plan is going to work and that you’re the right person to see it through.
You Should Have a Financial Statement Ready
Without detailed financial statements, your plan is incomplete. You should bring with you any:
- Balance statements from the past 3-5 years
- Cash flow statements
- Income statements
This is assuming that you have the business up and running already, and you’re trying to get a loan to keep it afloat, or to expand. If you haven’t started the company yet, you’ll have to convince the bank or credit union based on market research and projections alone.
The more you know about the niche you’re trying to get into, and the better you can explain what you’re trying to create, the more likely that you can get a loan based on future projections.
Know the Loan’s Amount and Purpose
You also don’t want to go into this meeting not knowing how much you want to borrow. You should have an exact dollar amount ready, and you should not pick it at random. You ought to be able to tell the person you’re meeting precisely what you’re going to do with every dollar of that money.
Talk about the marketing strategy you’re going to implement. Maybe it involves a website, different social media platforms, a sales funnel, or perhaps you’re going a more traditional route, with radio spots and TV commercials.
You should also have a list of equipment that you need for manufacturing if that’s part of your plan.
Show the research you did to find the best prices for what you need. That shows that you’re taking this whole process seriously.
Improve Your Credit History Before the Lender Meeting
Before asking for a loan, you should look at your credit history. Make sure there is nothing that might prevent you from securing this loan.
If your credit score and report don’t look too good, do what you can to improve them. Pay off any outstanding loans you have. Pay the balance on your credit cards. Make sure that there aren’t any liens on your property or anything else the bank or credit union might see as a red flag.
You may want to bring along your tax records from the last couple of years, and perhaps your bank statements as well.
If you know that your credit score is low, you could delay asking for the loan until you can bring it back up to respectability.
Think About Collateral
Some loan types require collateral, so think about what you have that you might be able to use that way. If most of your real equity is in your house, for instance, then you might need to use that.
If your credit is good, then this won’t be as much of an issue. If it’s bad, then the lender will want to know that you have something of tangible value on which they can collect if you can’t pay back the loan expediently.
Be sure if you do this, though, that you’re not going to default on the loan. If you do, you could end up homeless or in dire financial straits.
Once you’ve prepared yourself sufficiently, practice the meeting with your significant other, a family member, or a friend. Work on your confidence so that you’ll be ready for any question the lender might have.