So you have come up with a great idea that you think will be able to sell well to other people. There are many entrepreneurs who have decided to get out of the grind of day to day work in order to start up their own businesses, but this is not something that can be done without a little bit of work and dedication. You will most likely need to take out a loan to help with covering the cost of starting out, as well as having a cash balance available for emergencies. Finding who will lend you the loan is quite a challenge, but there are lenders who always on hand to provide assistance with small emergency loans. Here are the seven steps that you need to follow in order to get a business loan:
Decide How much is needed
The first thing that you need to do in order to get a business loan is to decide how much money that you need. Take the time to figure out a budget on how much you will be spending during the first couple of years before going to the bank. Having a well thought out budget that is reasonable and shows that you have done your research helps show the bank that you know what you are doing.
Check Credit Score
How easy of a time that you have at the bank and whether you are able to get the money that you need in a loan will often depend on how good your credit score is. The higher the score is, the more likely that you will be able to get a loan. Most banks will look for a credit score in the 700+ range.
You need to take the time to weigh all of your options in order to add the most strength to your application. Consider a co-signer or a partner for your business, especially if your credit score is lower. Invest a little bit more of your own money to help out as well.
Create a Business Plan
The people at the bank will not even look at your loan application if you have not taken the time to create a business plan outlining all of your ideas and plans for the business. Make sure to also include reasonable financial projections as well, so the bank has an idea of how much you plan to be making in the business and what is the likely time horizon for them to get their money back.
Find a Lender
Now that you have done all of the research and are ready to get the loan, you need to find lender that will give you the money that you need. You will have a couple of options available for doing this including commercial banks, non-bank lender, region specific lender, and micro lenders. Do a little bit of research while you are preparing your business plan to see which one will work the best for you.
It does not make much sense for you to just think up a good idea and then walk into the bank with nothing else. You are going to have to prepare a package for the bank that includes many financial statements, your business plan, and many additional items in order to get the money. Make sure to discuss what is needed with your bank ahead of time so that you can submit everything together and expedite the process.
Depending on the bank that you decide to go with, it usually will not take too long for the decision to be made about whether you will get the loan or not. Most banks have a list of things that they will look for from a potential loan and whether or not you meet them will determine if you get approved or not.