Most people looking to start a small business do not have the cash on hand to rent a location, buy the necessary equipment, pay employees’ salaries and handle other costs. For this reason, it is very common to finance a new business through a business loan.
Whether or not you can get a loan may make the difference between pursuing your dream of owning your own business or not. For help going about getting a loan, the U.S. Small Business Administration has some tips:
1. Consider what banks will require of their loan applicants. In general, you must be requesting the money for a sound business purpose. You and your partners must be of good character, with good credit and business experience. And, of course, you must demonstrate ability to repay the loan.
2. Provide the necessary information, such as your personal and business credit history, financial statements and projected financial statements, a detailed business plan, cash flow projections and personal guaranties from all principal owners.
3. Understand how much money you are looking for. The median small business loan is about $130,000-$140,000, though the SBA backs loans ranging from $5,000 to $5 million. The size of the loan will depend on how much your new or existing business needs.
4. Set yourself up for success by picking an institution most likely to approve your loan. Smaller banks are more likely to approve small loans. Community banks and credit unions may also be good bets. Of course, a bank you or your business already has a relationship may be more likely to take a chance on you.