Applying For a Small Business Loan
What is often overlooked by young entrepreneurs who are worried about the success of their business loan applications is that banks want and need to give loans. Their own business models demand these kinds of investments in order to generate revenue flow. Banks need businesses to flourish and they want to handle the finances of successful new enterprises.
And there is no end to the types of new businesses that need startup capital. A entrepreneur looking to market a new mobile app, a criminal defense attorney looking to start a new law firm, a middle-aged woman finally setting out and launching her own bakery. In many ways, this is part of the American Dream, the idea that a hard worker with a good idea can create a new company.
While the environment for small business loans has certainly grown colder in the recession era, new businesses are still the lifeblood of banks and if you can present a good idea with a solid plan and the appropriate collateral, you still stand a fair chance at being approved. Here are a few ways of maximizing your chances of having your loan approved:
Research banks that specialize in small business loans.
Some banks are more amenable to small businesses and local communities than others. Target these financial institutions first. Present yourself as someone who has been involved with his/her community for years and demonstrate a track record of entrepreneurial actions that make you uniquely qualified to start a new business in your area. Explain how this business will benefit the community. A bank that prides itself on catering to a certain community is more likely to lend money to someone who has strong roots in that area.
Know what you’re asking for and be prepared to explain why.
Concrete numbers is the name of the game here. How much money do you need? What will that money be spent on? How quickly will you be able to turn your business into a profitable one and repay the loan? What are your cash flow projections for the first few years? These are the types of questions a bank will ask you. Be able to answer confidently and truthfully.
Get a referral from an entrepreneur with good standing.
Added on to neatly and precisely completed paperwork, a solid plan, a good idea, and a stellar credit history, this could be the factor that pushes you over the edge. If you have a friend or associate who is a prized customer of the bank and can provide a glowing business reference for you, your chances of success will improve dramatically.
Applying for a small business loan can be a powerfully intimidating task.
Many young entrepreneurs will give up before they have even started, simply out of anticipation of some impossible Herculean challenge. While you will need to do plenty of research and put your best foot forward, think of acquiring a small business loan as a science, not a dice roll. If you present an organized plan and target the right banks, loan approval is in your future.