Nothing is more rewarding and more satisfying than starting your own business. The freedom of being in control of your financial future is very intoxicating, and most people who get this type of freedom never look back. In order to obtain your goal and become independent, you will need to find a source of funding for your business so that you can get the essential items and elements you will need to get the ball rolling. This funding usually comes in the form of loans that are geared toward helping small businesses get their start.
Applying for a small business loan is not as difficult as some people think it is. There are just a few steps and some basic information you need to know about how to get a business loan. The first thing you need to do when applying for a business loan is to create your business plan. A business plan is a detailed outline of what your business is about, what your industry or market is, how you plan to operate your business, and how you plan to generate business cash flow to pay back your business loan.
A business plan is required by most financial institutions that give out business loans. These plans are created so that potential lenders get a feel for the vision you have for your business. It also gives them a practical look at how you plan to generate business cash flow in order to be able to pay off the loan you borrow. If you are not sure how to write a plan, you can find templates online that will walk you through the entire process. If you need more help, you can always talk to a www.SCORE.org mentor. A SCORE mentor can help walk you through the preparation of a business plan and the financial projection that you will create.
Once your business plan is prepared, you will have a very good idea about how much of a loan you will need which means that you are now ready to look for lenders. Be prepared that you will need to pledge some type of collateral for your loan. This collateral usually comes in the form of a house or piece of property that can be taken as a means of repaying the loan should your business fail and you are no longer able to make your payments.
My recommendation is to apply to three lenders. Make sure that they are all Small Business Administration (SBA)-preferred lenders. Banks are incredibly leery of lending anyone, especially new small businesses (which they deem to be high risk), any type of capital or loans. The SBA provides a guarantee to banks to incent them to make loans to new small businesses. Fill out your application and submit all of the relevant contact information they request along with the financial documentation they require as part of the application process. If you are wondering why they need all of these records, it is because they do a type of financial analysis of your records to see if you are responsible and have a reputation for managing your money well. This analysis helps a bank to better understand the level of risk it is taking by lending you money.
Set up a proposal meeting if the lender requests one. This meeting is your opportunity to sell yourself, your skills, and your business to the lenders. You want a proposal that demonstrates you have a plan for success that will ultimately result in paying back the loan. Don’t get discouraged if you get turned down for a loan. Most individuals will get rejected by a few banks before they finally find a lender that understands that your ideas for a business are worth the risk!
Remember, running a business successfully does not need to be complicated. Keep it simple!
For more information on business analysis, business planning, and ways to grow your small business profitably, please check out our website www.portalcfo.com. Follow us on Twitter @portalcfo
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Manny Skevofilax is a consultant and speaker that helps his clients successfully navigate the challenges of growing their businesses profitably. Since 2003, Manny helps businesses enhance their results by using his experience in strategic planning, financial statement analysis, operations, organizational development, and team-building. His consulting firm, PORTAL CFO Consulting, Inc., has attracted clients from diverse industries in the United States and abroad.
Manny can be reached at 410-808-3441 or via email at manny@portalcfo.com.