Things to Be Remembered Before Applying for a Small Business Loan

If you want to start your new business or if you wish to expand the existing one, it is advisable that you should apply for a small business loan as quickly as possible. It is vital that small businesses are not eligible for this type of fund and it is important that you have to be cautious before you apply for this type of fund. If you have to ensure that you fulfill the eligibility criteria successfully and if your business maintains good reputation, it is vital that you should improve your scope to get it in the best possible way. This article will highlight on a few essential tips that you should follow in order to apply for this type of fund to the best of your abilities.

The first thing that you should follow is to obtain one copy of credit report of your business and that you have to ensure that it is an accurate one. All you have to do is to acquire one copy of this kind of report from the popular credit reporting organization as quickly as possible. There are several lenders who wish to read this kind of report before they start to review loan applications without any kind of delay.

Once you manage to get this kind of report, the next step that you should follow is to get the financial statements of the last three years as quickly as possible. The financial statements include the income statement, balance sheet and other relevant details in the best possible way. Plus, you should be able to show the current financial statement of the last three months. You may also have to produce other relevant documents such as balance sheet, income statement and so on. You should also be able to provide the details of your business plan as much as you can.

The next step that you should follow is to write down an executive summary as quickly as possible. It is vital that this kind of summary should have all the relevant information such as the background of the business, its brief description, the exact time within which you want to repay this type of fund and so on.

You should also prepare an appropriate loan proposal along with relevant details such as the exact amount of loan that you want to borrow and the exact purpose that you want to borrow and so on. Once you are able to prepare this kind of proposal, the next step that you should follow is to prepare an effective statement for loan repayment as fast as you can. It is vital that it should include all the relevant details such as the way you wish to repay this type of fund, the exact time within which you want to repay it and so on.

The final step that you should follow is to submit this type of application and to provide the relevant documents to the appropriate lender within the scheduled period of time. It is vital that you should wait for a certain period of time before this type of application has been sanctioned by the concerned authority.

Business Funding Has Gone Easy for Everyone

There was a time when the majority of the people didn’t get financial aid from any banks or money lenders. But currently, a financial trend has changed. You can get financial aid from small finance companies. What is the source of small finance funds? The key sources are credit unions and banks. They provide such loans to individuals and partners. Today even the housewives establish their business through cottage industry. Women are skillful in nature. For example, some women are good in stitching, whereas others can make excellent pickle at home. Some women open their own beauty parlor as their hobby. You must follow some truths while applying for small business money:

Vital facts for small business funding application

Every individual makes mistakes. It is advisable to know the mistakes on time and fix it. You should avoid some factors while smearing for small business funding. Following are few points to consider.

Not paying the increased amount –

Sometimes people have a trend of not paying the sum that has increased. For example, if you have taken a loan and the semi went higher due to increase in tax and vat. People avoid excess amount. This is an unhealthy practice. The lenders will put a negative impression.

No scope for credit advance –

There are some emergency situations at your business establishment. For example, you suddenly need to repair your office room. If you don’t have cash at that time, it will be very difficult. You need to take out the credit in advance.

You have to be very careful while applying for the loan for your small business. You need to care about many things while applying for the loans s that it will not get rejected in any case.

Negligence of own credit –

Firms dealing with funds have become fairly elastic today. But, it is always better to keep yourself flawless. If you have the credit card, make the payment before the due date on a regular basis. This will be a plus point for you when the lenders evaluate your financial statements. But, sometimes you end up will no repayment of credit card bill. You must avoid it. Otherwise, it will provide bad influence on a financial profile.

Business and personal finances mix up –

The lending institutions will be eager to know your business success. Whether you are in loss or gain is what they will find out. Now if you mix both personal and business finances, they won’t get the proper idea. Your case may be rejected. One of the common mistakes, which many individuals make, is mixing up of personal finance and business finance. But this is not the right step to get a good deal for your small business.

Business Financing Strategies – Proof of Market

Start Up Business Loans Are Hard to Get

It’s no secret and should not surprise most, it’s relatively difficult to obtain business financing for a start-up business specifically in getting a conventional bank loan. These financing institutions are in the business of making money… not losing it based on a ‘hunch’ or unproven business. So, if you are a start-up or at least thinking of starting a business, how can you solve this problem of getting a business loan from a conventional bank? Here’s the key: don’t be a start-up business. Easily said, but not difficult to accomplish if you practice discipline and commitment.

The main reasons businesses fail in obtaining financing are:

  • Lack of Concept
  • Lack of Market Proof
  • Low Profit Margins
  • Lack of Business and / or Personal Assets for Collateral

Today, we’ll go over Lack of Market Proof.

How to Gain Proof of Market

It’s hard to produce and sell products and services to a market that doesn’t exist or is too small. Start-up businesses fail to consider the size and profitability of the market that they intend to serve. Due to the many options made available to aspiring start-up businesses via social media and other online platforms such as Google or Yahoo, it’s relatively simple to find out the market potential for a business. The recommendation is to apply the MVP or “minimum viable product” principle which means you take a simple prototype of your main product and / or service offering and get it to the target market quickly. The purpose of doing this is to gain quick feedback for necessary revisions and proof that the market exists. Also, to really get a flavor of the market, hit the streets and ask prospective customers. Identify several suspects for your product and / or service offering, and reach out to them with a phone call, direct mail survey, or in person visit. The primary purpose of these activities is to gain feedback and eventually a sale if mutually beneficial.

From what I’ve observed over the last decade in working with and observing start-ups, it takes 12 to 18 months to really gain traction in a market. Please don’t confuse this with the testing of the start-up idea in the market. This should be quick to notice taking no more than 30 days. In other words, if you’re MVP doesn’t garner enough feedback and ultimately sales, then you either abort mission or revise / re-test.

How do you strengthen your case for business financing with proof of market? Once you have proof of market for your business via sales and proof of cash received via business bank statements, include these documents in the business financing package. Show how the business loan will either enhance the ability to gain more market share or grow profit margins through business growth.