Getting a small business loan may not be as difficult to get as you have been told, if you approach it in the correct way. You need to have all your ducks in a row before you file an application with a lender. Getting a business loan could be the major factor in deciding if you are a successful business owner, or one of the many that will close their doors for good within the first five years.
Let us jump right into the steps that you need to follow to get a small business loan through any lender that you are considering.
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- Business Plan: This step cannot be stressed enough. It not only will help you get a small business loan, but it will give you a guideline to follow that will lead to success. If you do not have a business plan in place you will need to do that before anything else. It will need to detail every aspect of your company. The plan starts from the planning stage, to launching and operating, and everything in between. Every lender will need to see it so have it detailed and refined before you apply.
- Loan Types: You need to do some research and decide which type of loan that you will need. It is always possible to use your own money, or to get a loan from a friend or family member, but many times these will only be enough to get you by, but not enough to keep your head above water.
- Equipment Financing: This is a type of loan that allows you to get the machinery you need without having to foot the entire bill out of pocket. Most of the time the lender will put the equipment up as collateral for them. This means that if you miss payments, they will take the equipment and auction it off to pay themselves back for the original loan, plus interest.
- Property Asset loans work well for business owners that have commercial property. The bank will usually loan up to 80% of what the value of it is.
- Personal loans are probably the most common types of loans. You will need to ask yourself “what are business loans?” and how likely are you to be able to get one.
- Credit cards, or a line of credit through your supplier, can also give you enough room to get the capital that you need. But remember, these ways can have excessive amounts of interest, so if you go this route make sure you pay them off every month before the interest gets charged to them.
3. Budget: You need to have a budget detailed out so you know how much money you can afford to spend on a loan payment. If you are just starting out this may be a hard step because you are spending more than you are making. If you are still in this stage of the game, you will need capital to get moving in the right direction. Get a loan that is bigger than what you actually need and use the extra money to pay the loan payments until you start getting profits.
4. Compare Lenders: You will want to get the best deal that you can, as long as it covers the expenses that you need. The best way to do this is to use an online comparison platform, like iSelect, who will do all the leg work for you. Also, if you’re looking for a business loan for bad credit history, you can look for specialized lenders that can meet your needs.
That is it for the basic steps that you should follow to get a small business loan. Whether you need startup capital, money to expand, or some cash to get yourself out of debt, you need to be educated and prepared before you try and dive into a business loan.
