It’s surprising that so many people are confused about business loans considering the entrepreneurial spirit of most Americans. While these loans might seem daunting, the truth is that they’re fairly easy to get if you know what you’re doing. This quick guide will show you what is expected of you and how to successfully obtain a loan.
Banks will look into you and your business plans, so be sure to have as much information as possible. On your side, they make sure that you are of good character and that you have good personal or business credit. Collateral and the ability to pay are also considered. The business plan must be very specific, often including information about the scope of the project, your experience in the field, nature of the business and other factors.
Choosing the Lender
There are many banks and lending offices, which makes it easy to get bogged down by choices. If you’re looking for a small loan, then it’s best to avoid larger banks because they tend to shy away from them. That’s because they don’t make much money and it requires the same amount of underwriting as larger loans. Credit Unions and community banks are also a great option for both small and large loans as they tend to have fewer requirements than larger banks. If possible, choose a bank that you have a history with to improve your chances of getting the loan.
Knowing how much to ask for is critical. Asking for too little will keep you from paying for everything and asking for too much will get you denied. The typical small business loan is about $150,000 to $250,000. Going beyond this will often require a completely different type of loan for a larger business. If you’re unsure of how much to ask for, then review your business’s needs and ask the lender about their opinion. They want to work with you to help you get the loan, so there’s no harm in asking for help.
This is one of the hardest parts because most people looking for their first business loan often don’t have much financing. Ask friends and family to help you with your dreams. You can also look around for investors to inject some money into your business plan. This will show the bank that you’re serious about the venture, and they will have a better outlook on the business’s success.
Getting a small business loan isn’t as hard as you might think, but the process is rigorous and you will need a good amount of documentation to prove that you need the money. Just be prepared and look around for the right lender to significantly improve your odds of getting a loan.