Getting a small business loan is a critical step in the process of starting a small business. Without the funding you’ll need to seek out alternative methods that could be more expensive and risky. However, before setting off to the bank, you want to be sure to prepare.
While a lender would love to see that you’ve had previous business experience and big bucks in the bank, it may not be the case. Still, you can increase your chances by preparing beforehand. Your business plan will be the most important preparation, but you’ll also want to get your personal finances in line and calculate the assets you have, both personal and business wise. If you need working capital for your business soon, CAN Capital offers up to $150,000 in as little as 48 hours, much less time than traditional bank loans.
Have Your Completed Business Plan
There is a lot of talk about business plans in the startup world – whether they hold you back, keep you on track or are simply a waste of time. However, in the loan world, your business plan is everything. Entrepreneurship.org suggests, “Your business plan is a living, breathing financial document. It’s also one of the first things a bank will want to check before issuing you a loan.” Before handing it over, though, consider these two important steps.
- Read and re-read: Consider hiring a professional to go through your business plan one last time to ensure everything is in place – you should use the expertise of a lawyer, an accountant, or your business mentor.
- Don’t skimp on finances: The bank or other lender will want to know what your cash flow looks like now and in the future, what your current income is, and a one year balance sheet broken down into months.
Calculate Your Assets
Your assets are all you can guarantee the bank if you fall short in your loan payments – therefore, the lender wants to see you have something other than passion for this business and hope that it will all come through. Be sure to consider every asset option, including personal and business.
- Business: Do you own another business? Have invested in someone else’s? Do you already have new furniture for your office?
- Personal: Think – mortgage, retirement plan, financial trust.
Clean Up Your Credit Report
This can’t be done the week before your lending appointment – nor can it happen a month or two before. It will take time to clean up your credit report, so starting the process 6 months to a year before is necessary. When assessing your report, consider three important aspects.
- Errors listed: Get any error amended and corrected right away.
- Where are you falling short: Do you not have a business credit report? If not, get one started now. Consider signing up for a business checking account, for example.
- What bills should be paid up: Whatever credit cards are still hovering near their credit limit should be paid down aggressively. Start with the highest interest and fee structure cards – those won’t look good to a lender.
Getting ready for the loan process is an important aspect of starting your own business. But remember; don’t wait until the last minute. If you are in serious credit trouble or don’t have a thorough business plan, don’t meet with your lender until it’s remedied. If you start early you’ll increase your chances of getting the loan and making your business dreams come true.
Bio: Jessica Sanders is an avid small business writer touching on topics that range from social media to business loans and small business insurance. She is a professional blogger and web content writer for ResourceNation.com.