Thinking about starting your own business? Most small, independent businesses start out with an idea, a business plan and a small business loan. Before applying for a loan there are a few basics you should know, depending on what the bank or institution you’re approaching is looking for and what type of enterprise you’re planning on opening. Doing your homework before applying can dertermine whether the bank either grants or rejects your loan.
A lender will want to know about you and your experience, as well as your financial details: savings, credit history, etc. Your professional experience in the field you’re about to go into will be of importance, as well as any related education. All of these things contribute to how dependable you are as a potential business owner.
What is your business plan? This is the most important part of your loan request. This outline of how you plan to build your business and create profitability will show lenders how serious you are and how feasible your business could be.
You should be quite clear about how much money you will be asking for and why. Detail the reasons for the figure you come up with – it should include costs for startup and overhead, as well as operations costs like payroll and inventory. Where will the banks’ money be going and how will it be used? Accuracy and detail are important here.
You should be able to present the bank or lender with an approximate date when you believe you’ll be able to repay the loan and how. Be professional. Use financial statements and cash-flow projections to show how you plan to return a loan and get your new business on its own two feet and out of debt.