How to get a small business loan

Wednesday, 27 April 2016 Andy Anderson

Ready to buy or start your small business? Financing a small business is one of the most common questions new entrepreneurs have when they decide to move forward with their plan. Getting a small business loan is a great option but it is best to be properly prepared before moving headlong into the process. Here's a brief outline and some advice before applying for your small business loan.

Prepare your business information by making a Business Plan. You’ll be happy you did. Not only will this improve your chances of getting a loan, but it will provide a crucial framework for your company. There are Fill-In-The-Blanks Templates available on line. 

All Lenders will want to know how well you handle your finances. Give an exact amount and then demonstrate for the banker exactly how the loan will be used. Most important to the lender is, to explain how you plan to pay the loan back by generating future revenue.

What is your business all about?

Take this a step beyond the business plan and tell them why your company deserves the money. Here's a few things you can point out:

  • Highlight past successes.
  • Describe where you plan to grow
  • Outline whether or not there have been any major advancements or advantages your business has to offer
  • Explain any pertinent information about your personal work or entrepreneurial history that demonstrates your ability to be a success.
  • Show them that you’re someone that they can trust with the money.

You should take the information, including your loan proposal and submit it to a local lender. If the lender is unable to approve your loan, you may ask if the lender can consider your request under the SBA loan guaranty program. 

Under this program, the SBA can guaranty up to 85% of a small business loan; however, the lender must agree to loan the money with the SBA guarantee. The lender will then forward your loan application and a credit analysis to the nearest SBA District Office. After receiving all documentation, the SBA analyses the entire application, then makes its decision.

The Application Process

Before applying for a small business loan, you should gather all of the necessary information. Documents vary but the most common required items include:

  • a history of your business
  • financial statements for three years
  • the detailed description of the purpose of the loan
  • schedule of term debts
  • an aging of accounts receivable and payable outline
  • opening-day projected balance sheet
  • details about your lease
  • value of owner investment
  • a projection of income
  • list of expenses and cash flow
  • signed personal financial statements
  • a personal resume.

Upon SBA approval, the lending institution closes the loan and disburses the funds. To be eligible, a business must be operated for profit and not exceed SBA's size standards. The process may take up to 10 days to complete. If the lender needs SBA applications and/or guidance it may contact the nearest SBA District Office by visiting http://www.sba.gov/localresources/index.html.

Read 3083 times Last modified on Wednesday, 27 April 2016

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