5 Things to Know Before Applying for a Small Business Loan
So you have a great idea for a new business venture. You have a partner, the premise, the proposal, even a desired space to set up shop but there’s one area you’re coming up short…you don’t have the money to cover it. If this is your first business you may be nervous about taking out a loan. You may be sure your venture will be successful but you need to prove it to whomever is loaning you the money. We are going to share 5 tips to get your loan approved and get the money you need for your start up.
1. Business Credit Card: Some people don’t think of a business credit card as a loan, but technically the credit card company is loaning you money, which you will pay back. If going this route, you want to consider that credit cards tend to have a higher interest rate than other forms of business credit. It’s important to go over the interest rate with the credit card company before deciding this is the best form of loan for your small business. The credit card route is good for a company that already has a workspace (or doesn’t need one). With the credit card, you will be able to move forward with your business by purchasing supplies and paying for a website domain. It is a good way to get a jumpstart on these expenses before you need a space or before you need to expand in to a space. It can give you opportunity to begin your business, taking the chance to see how it will succeed before spending extra expenses on rent.
2. Meet With Your Local Small Business Association: It is important to do your research before applying for a loan (which is probably why you’re reading this article). A great place to start is your local small business association. There you will have a support group of others who have been in your shoes looking for a loan before. They will have the proper research and tools you need in order to take out your first small business loan. They will also be able to lead you in the right direction depending on your industry.
3. Small Banks for Small Businesses: Often, small banks are the go-to for small business loans rather than the big guys. As I said, do your research. With smaller, local banks we often find they cater to certain industries and markets and you may find one that will cater to yours. You should also look into banks that offer an SBA guarantee loan program—not every bank participates, but many do. This program is designed for startups and has been a key player in getting loans for small businesses. When you do pitch your small business to the bank, keep in mind it is the small businesses that are helping to build the economy. This is why programs such as the SBA guarantee loan program are in place, as an extra boost to help you and your business.
4. Be Prepared and Be Polished: Your loan will greatly impact your future. You don’t want to be nervous during your loan interview, but don’t ignore the importance of the interview. In order to cut down on nervousness be sure you are ready for any questions the bank might ask. It is important to present a professional demeanor. You should dress polished, in business attire. Your best bet is a suit and tie for a man and suit or dress for a woman. You want to show the bank you are confident and serious about your endeavor in all aspects of your interview so the bank will be confident in giving you the loan.
5. Have a Clear Plan: It’s important to have a clear plan regarding how you intend to repay the loan. You won’t get a loan without it and you may need to plan ahead so you are prepared to possibly only break even on your loan before actually making money for your business. You also need to consider “what if” scenarios. What if the business should fail? No one likes to think about this before setting off on a new endeavor, but frankly you would be making a big mistake not to. Thinking about the “what if’s” can save you from a lot of trouble and heartache down the line should your business fail and you aren’t able to pay back the bank.
Good luck on your small business venture! Being well researched is the best thing you can do for yourself. For more information visit www.e-farmcredit.com.
Ilyse Kaplan is a writer for www.e-farmcredit.com. Her specialties include loans, SEO, and marketing. When she isn’t busy writing you can find her hiking with her dogs and watching live music.