Starting a business requires capital and a lot of careful planning. Even the smallest business will require some form of start up money – the larger the operation, the greater the need. Unfortunately, business loans may be difficult to procure, especially if the owner doesn’t have a proven track record of success in the business world. That’s why it’s important to properly prepare before applying, starting with a business plan.
A secure business plan is critical when trying to secure a loan for a new business. Lenders are looking for a plan that is well thought out and easy to execute. Any unknowns must be measured and accounted for and details for managing both sales and operations must be included. Ultimately, preparing a business plan is a very helpful exercise. Not only is it a key piece when attempting to secure a loan, but a good business plan can also keep the business owner organized and help them estimate how much capital will be needed in each phase of their startup and growth.
In addition to a solid business plan, good credit is also essential when securing a business loan. Obviously this means managing personal credit and making timely payments leading up to the application. In addition, it’s important to satisfy all initial repayment requirements and meet deadlines as you build your startup. Regardless of your business aspirations, experts recommend that you seek credit through a tax identification number rather than through a personal SS number. If the only immediately available credit is a personal loan from a friend or family member, make sure those payments are made on time with a check or money order so that there is a reviewable paper trail of proven payments.
Assets can be another helpful consideration when trying to secure a business loan. Generally speaking, lending institutions will look at your personal home, other real estate, and/or personal investments to determine your credit worthiness. These could possibly be used as collateral and may help to get a business loan if the credit history is not strong enough to qualify, so make sure you organize and prepare all related documents prior to applications.
Finally, proof of income must be provided. The loan officers may ask for up to two years of income tax returns or monthly bank statements to assess and evaluate your income. These are the most easily verifiable proofs of income and display your initiative and ability to follow through and produce, all of which help to assure them that their investment in your new venture will be repaid.
If you have an idea for a startup (or just need money to expand your existing business), make sure you quantify and share all related supporting documents to any potential lending institution to help make the case for their granting of your request. As always, if you have any questions about how to prepare, evaluate or present any of this information, contact Lescault and Walderman at 1-866-496-2042.
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