How To Apply For A Small Business Loan

culled from:bankingsense.com

It doesn’t take a financial analyst to know that not many people have the expendable funds it takes to start up a small business. For those who don’t have much to start with, there are small business loans. Applying for a business loan comes down to a lot more than walking into your bank and simply asking to be financed. You’ll need to prepare for questions that you will be asked, information you’ll be asked to present, and the possibility of denial.

Questions You’ll Be Asked
Regardless of the exact type of loan you’re applying for, the lender will want general information to help them determine whether your business is worth the financial risk or not. These are general questions that you can expect to be asked by the lender:

Why do you want to apply for a small business loan?
How will you use the money loaned to you?
Who will your suppliers be, and what will you need to purchase?
Do you have other business debt?
Who will be involved in the business venture?
What are the details of your personal background?
These are all questions that you can be fairly sure of being asked by the lender. Prepare thorough and well thought out answers before actually applying for the small business loan.

What You Should Bring
The Small Business Administration advises bringing along various documents and information for the lender to go over. These are just a few examples of information that will likely be requested at some point during the loan application process.

Resumes. If you have a background with managerial or business experience, the lender will want to know.
Income tax returns. Even if you don’t have previous income tax returns for an existing business, provide your own personal tax returns.
Business credit report. If you have a business already, the lender will want to take a look at its credit report. If you don’t provide this information, the lender will pull it themselves. Providing it ahead of time can decrease the amount of time it takes for the lender to make a decision.
The business plan. This plan should include projected profit and losses, balance sheets, and cash flow.
Collateral. In the event that the lender wishes to secure the loan, you’ll need to provide collateral. If your business plan is strong enough, you won’t need to provide collateral for loan support.
Once you’re ready, choose a lender and let them know you’re interested in applying for a small business loan. Avoid applying for more than one loan from multiple lenders; each institution will conduct a credit inquiry. Each credit inquiry will shave a small bit off of the credit score – something you don’t want happening when you’re looking to borrow money.

Moving Past Rejection

There’s a very realistic possibility that your business idea could be denied for financing. While this can be frustrating, you can take the circumstances of your rejection and use them to avoid problems in the future.

If you’re denied a small business loan from the lender in question, Fox Business recommends finding out what tipped the scales out of your favor. Make amendments to your proposal and try again.

If you’re applying for a small business loan from a commercial bank and you’re repeatedly denied, move on to other financial institutions such as credit unions or community banks. Many organizations and companies provide business financing; keep looking until you find a lender with reasonable terms that shares your vision with you.

Most importantly, never give up. Use the business plan resources provided by the Small Business Administration to develop a solid, marketable business strategy that lenders won’t be able to turn away.