Getting new small business loans hasn’t always been easy. There are basic steps you should take while applying for one. Prior to getting a small loan, you have to decide what the small loan is needed for and how much the business needs then judge the reliability of the principals who are borrowing the money. It is important to know what lenders look for and how you compare to those expectations.
Different lending institutions have different standards, but in general, in?order to consider your application for a small business loan, the basic requirements include:
- Sound business purpose. Have a sales pitch, be sure to include what makes your business a better bet than others. Remember that for your business to sell, first you have to sell your business. The business must be eligible based on size, use of loan proceeds and the nature of the business (no lending, speculating, passive, gambling, etc.)
- Availability of capital. You’ll need to put up a certain amount of money–maybe from personal savings, an equity loan on your home or money from friends and relatives–in order to borrow money. Lenders may be more willing to take a risk on your business if you’re willing to risk your own money as well.
- You and your partner(s) are of good character, have experience and good personal and/or business credit history. Lenders review your education and experience as well as personal, social media and business credit history. It may be helpful to get character references from respected community members and former employers to bolster your case.
- Capacity to repay. Lenders want to be repaid, so your capacity to repay the loan is critical in determining approval. With a new business, it’s important to include a detailed explanation of how the business will be able to repay the loan by including projected expenses and income based on solid research, not just wishful thinking.
- Your ability to pay back the small loans. As a safeguard to your capacity to repay, lenders may require a certain amount of collateral–chiefly assets that can be sold, with the proceeds going to the lender should you default on the loan. Collateral may include inventory, vehicles, cash, investments, real estate and capital equipment such as machinery e.t.c.
Your chances of getting easy business loans will be enhanced by having a solid business plan and incorporating some of the points listed. Are you starting a new business? Get a small loan today!