How to Get a Loan to Start a Business
In addition to having a great idea for a new business venture and a solid business plan to back it up, knowing how to get a loan to start a business can be equally important to getting your new venture off the ground.
Startup businesses have their best shot at securing financing to start their ventures when the founders do some preparation before approaching lenders. If you want to know how to get a loan to start a business, study up on the following guidelines:
- Do your research: Gather information about possible lending sources to understand which might be a fit for your business and needs. The type of lender you seek out will dictate the extent of the application information you’ll need to provide
- Create a full business plan: When they process your application, most every lenders will want to see your plan, in addition to financial projections and other documentation. Thorough and solid business plans are critical to the decision lenders make about funding a new company.
- Understand your personal credit report: Get a copy and check it for negative information. Lenders check your personal history when evaluating your loan application. Be prepared to address any negative credit information in your application or discussions with lenders.
- Gather necessary documentation: The full list will be determined by the lending to whom you’re applying, but often includes: your business plan, financial projections, credit report, tax returns, bank statements, resume, and detailed description of how you plan to use the funds
- Register your firm with the local government agency. Lenders will expect to see that you have officially filed your business with necessary parties and have all the required licenses and permits needed.
- Invest if you can: If possible, show your lender that you are planning to invest some of your own money into the startup. You can also list other collateral on your application. This shows an additional level of personal investment in the business.
- Submit your application package: Once you pull together all documentation, submit o the bank or lender. Be prepared to supply additional documentation upon request.
- Wait for the lender to make a decision. The loan application evaluation process can take few days or weeks depending on the financial institution.
The question of how to get a loan to start a business is an important one for entrepreneurs. Anyone who wants to launch a startup should know how to go about this process. Lenders consider loans for startup businesses risky because they do not have proof of the owners’ ability to successfully manage a company and make a profit. Nevertheless, entrepreneurs who approach the right lenders and present a thoroughly prepared loan application package can maximize their chances of securing the small business loan.
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