Starting or running a business is a rewarding experience, but finding capital to fund the business is not always easy. Many financial institutions require a lot of paperwork, bank statements, financial statements and cash flow as guarantee.
However, do not lose hope as there are smaller financial institutions that can process your application within 24 hours and with less requirements. You can acquire the funds you need to take your business to the next level in just three or four steps. Once you have secured the needed funds, you can focus on your business growth.
Here are five tips to ensure you secure a small business loan:
1. Know your budget
Calculate exactly what you need and present that to the lender. Show sufficient funds that will support the amount you are requesting. Provide a financial plan that clearly shows you can back your loan installments with your current cashflow and sales forecast.
2. Choose the right lender
There are lenders such as banks, shareholders and angel investors. All are different lenders with their own requirements. All these financial lenders can probably support your request for a small business loan, but it is better to choose a financial lender that can offer you the best combination of installment payments and the exact loan amount.
Choose a financial lender that you are confident will help you secure your needed capital. By understanding what the lenders are looking for and what aspects of business they consider risky, will help present your application in a favorable manner.
3. Prepare a detailed business plan
Even if you are a small business, it is important to have a well-conceived business plan that clearly explains how you will use the loan requested. A good business plan will give you a chance to convince potential lenders that your business is accountable, efficiently managed and is achieving the objectives planned. Lenders will surely ask some in-depth questions about your business and the financial history of your business.
You have to show how the loan will improve your business. It is good to be thoroughly prepared with the right response. This will help the lender understand how the money will be invested in order to determine the feasibility of your application. You can also breakdown the amounts to show how the money will be invested. Additionally, your business plan should show realistic profit potential and financial projections.
4. Ensure supporting documents
Prepare your application and all supporting documents. The financial institution you select will probably have a checklist of all the documents they need to process your application. They might ask for your personal financial bank statements, business cashflow statement, and business certification and license. The financial lender you select may not require all this information.
However, having these documents ready will ensure a thorough application. These documents will help you answer the key questions the lender is likely to ask you. Supporting documents is not limited to financial statements. It can also be statistics needed to support your business. The lender might be interested in market trends and what statistics you have used to determine both your business and financial goals.
5. Be honest when presenting your application
Being optimistic about your business is good, but being overly optimistic without the supporting evidence will not help to secure your needed funds. The latter will also appear more risky for the lender making it difficult to approve your application. When talking about business financial health, it is always better to be transparent. Lenders understand the complication of business startups and the need for financial backing. It is best to be 100% truthful about your cashflow and operating expenses.