Steps to Take When Applying for a Business Loan
Applying for a business loan can lead to a great deal of stress for entrepreneurs and others hoping to launch a business or generate cash flow for an existing one. There are some key steps to take, though, that can alleviate much of that stress, help to ensure the success of the application, and help the company to make a profit and repay the loan in a timely manner.
Every lender wants to know a few crucial details before they enter into a business loan. Be prepared to present them with a well-drawn business plan, financial statements, and projections of cash flow and profit. Additionally, projecting repayment will help them to develop confidence in your repay abilities and to structure your loan for the greatest success.
The Business Plan
The idea of a business plan may evoke a sense of dread and intimidation in many business owners, but the work it requires translates to greater success in the end and can represent exciting investigation of the market potential for your product or services. Each plan will be individualized and personal, but following an outline for success is a good idea. Include in your business plan a cover page, executive summary, company overview/profile, analysis of the industry, customer-base analysis, marketing strategy, operations schedule/plan, management profile, and financial plan/course of action.
Essentially, the business plan is a road map for your company’s journey and success. Having the hard copy in hand for exploration and discussion will help your lender to envision your products and/ or services implemented and to imagine the success of your company. In fact, the business plan itself helps to establish that you have thoroughly studied every possible scenario, and that helps the bank to establish confidence for your business loan.
Establishing credit worthiness is crucial for creating the sense that a company will be in the position to repay debts. Without a decent credit rating, no business owner should expect great success in securing a business loan. Business and personal financial statements will go a long way toward establishing sincere desire and ability to pay back lent money.
Doing your homework always helps in the end. Your financial projections will pave the way for lenders to understand what the return on your investment will be. As they enter into a business loan agreement with you, they must be sure that you will be able to turn the money you put into your company into a profit that allows you to repay the loan plus interest. After all, banks are businesses, too, and everyone needs to have confidence in the bottom line.