In the present era of entrepreneurs, there are tons of creative business ideas floating in the market, but what keeps resisting the business development and growth is financing.
Whether you want to expand your ongoing business or you want to get off the ground with a new start-up, you will need proper financing to get your regular operational expenses and can help your business survive when profit is low. To get proper financing for your start-up business loans to come in handy.
It is fruitful for a creative business idea holder to remove the resistance of monstrous financing with a business loan that allows executing a million-dollar idea. Nowadays getting a business loan is not that easy as it was some years ago due to high-risk business loans which play a part for both borrowers and lenders.
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Therefore, it is the need of the time to completely understand the importance of taking proper and necessary steps while getting a business loan from either banks or other financial firms.
To make it easier for you to get your million-dollar business idea off the ground or to keep your ongoing business running smoothly in low-profit time of the year. The following are the seven tips to boost your chances of getting a business loan.
Table of Contents
#1. Business Plan
To successfully get a business loan, the first tip or we can say the most important requirement is to have a proper business plan.
It is not possible to convince the lender if you do not have a proper attractive business plan. Your business plan is your introduction and an essential tool for a new business startup.
It should include proper vision and mission statements, business goals and objectives, and how you will achieve them. Your business plan should include good financial statements for your business.
Adding marketing analysis, executive summary, and needful graphical analysis will be a plus.
#2. Required Capital
It is good to do proper research and calculation of required capital when applying for a business loan. A proper cost to profit analysis is a must before you target a lender.
You should estimate your need for capital properly and should not overestimate or underestimate the required funding because it may lead to creating doubts in the mind of the lender.
So, take your time and analyze your financial provision carefully. Make a financial statement as part of your business plan.
#3. Use of Capital
Most of the banks have the policy to ask the borrowers about how they will use the funds. You should be clear with your business goals while presenting your idea to lenders such as banks or other financial organizations and how you will use it; This makes it easy for banks or financial organizations to determine whether the required funds are enough for your needs or not.
If you want to keep your business running, short term loans are advisable. Therefore, it is also an important consideration to be taken while applying for business loans.
It is important to check the eligibility of yourself for getting a loan before applying for it. Banks or financial organizations verify the applicant’s eligibility before giving loans. Such as checking your financial reports and scores.
If your financial score is not up to the mark of the applied bank, you should first raise it by working hard and then apply for a loan. It will not only save your time but will also put a good impression on the lender.
You will need to submit some documents according to the requirements of lenders. Lenders may also look for how long you have been in business. Many online lenders require your annual bank statement to see if you can pay the debt. Loan lenders also ask for legal documents. So, it is important to gather your documents to qualify.
#5. Loan Repayment Tenure
Another thing to consider is the repayment tenure. It is important to consider how long it will take for you to clear all debts before selecting debt tenure or loan tenure. Underestimating loan tenure may lead to a financial crisis for your business. Carefully look for your cash flows and evaluate how much loan repayment you can afford according to your total income.
Considering your loan amount and repayment tenure according to your needs. If you want to run your ongoing business in the low-profit period, you should go for small business loans. Your income should be more than 1.25 times your total expenses to repay your debts comfortably.
#6. Lending Options
It is advisable to keep your lending options open. You should not rely on only one option and should consider the banks with low-interest rates. You should consider the fact that banks usually put higher interest rates, so always pick the lending option with care.
There are many lending options available in the market, including banks, online lenders, and nonprofit microlenders. Consider two to three lending options and compare them according to repayment tenure and interest terms. And choose the lending option which you qualify for with the most flexibility and suitability for you in loan repayment terms.
Once you have considered your options, it’s time to apply for the business loan that fulfill your needs and that you qualify for.
#7. Make an Appointment
Once you have submitted all your requested documents and have successfully qualified for the loan, the final step you need to execute before pitching your business idea is to make an appointment and create a compelling presentation.
Never forget to include Executive Summary in your presentation because many lenders are interested in knowing the executive summary before making any decision. Request enough time to your loan officer with a short presentation covering all aspects of your business plan such as mission-vision statement, goals and objectives, financial statement, marketing plan, and cost to profit analysis. Be concise, on point, and confident while presenting.
Always remember to enter the lender’s office with a positive attitude. A negative attitude may create doubts in the lender’s mind. Be organized and over-prepared by putting yourself in the shoes of the lender, and you will surely exit a million dollar financing.
In a perfect world, every entrepreneur would have made his business idea into a cracking success, but as you have seen, that’s not how it goes. Apart from a great business idea, you need proper financing to execute it, which is fulfilled by getting business loans; however, it is not possible to get one easily.
The above steps are the most important considerations to be taken while approaching a lender for a business loan. While presenting your business plan, you should think, according to the mind of the lender. Put yourself in the shoes of a bank or financial organization to increase your rate of success for getting the loan.
It makes you realize whether the present circumstances and facts are enough to convince the lender. Once you have looked at the script from the lender’s point of view, you will be able to analyze your situation in a biased light. After considering all the tips discussed above and with a positive, organized, and over-prepared attitude, you will get the fuel for your business car.