Most businesses rely on loans to start up and keep going. New entrepreneurs may feel lost when trying to figure out how to finance a company. Review a few tips for improving your chances of getting a business loan.
Put Your Best Foot Forward
Any time you want someone to invest in your business with a loan or investment, you need to look like a solid company on its way up. Financiers and investors want to see a company with smooth operations and good business sense. Even if you’re coming through hard times, demonstrate that you have an excellent opportunity worth investing in.
For example, if you run a music store, make sure you have an attractive music eCommerce website. Successful companies have a robust online presence, so work with a service that can create a site that draws in the right kind of customers. A fluid site shows you’re serious about your company and ready to go to the next level.
Create an Excellent Business Plan
The prime concern for lenders is if you’ll be able to pay off your loan. Most lending institutions want to see a business plan to demonstrate your capacity to repay. Include the following elements in your business plan.
Provide a brief breakdown of what your company does, why it’s important, and why it will succeed. In less than a page, outline the information that will follow in the plan. Express your overarching vision and mission statements.
Description of Company
Offer more detailed information about your company. Describe the team and your unique advantages in the market. Share the problems you solve and the niches you serve. Be clear on who your ideal customer is and why they need you.
Outline the legal structure of the company and any plans to adjust it with growth. An organizational chart of key members is helpful, and you should share the resumes of each executive. Explain how their involvement will assist the company.
Products and Services
Explain in more detail what you offer and who uses it. If any copyrights or patents are applicable that make your items proprietary, be sure to share that as well.
Explain where your industry currently stands and where you should be over the course of five years. Detail your competitors’ strengths and weaknesses and how you plan to take advantage of the current landscape.
Sales and Marketing Strategy
Outline how you’ll market to your ideal customers and present a cogent sales strategy.
Use concrete evidence to show where the company should be financially in five years. You’ll need the following documents for your forecasts:
- Income statements
- Balance sheets
- Cash flow statements
If your business is too new to have a few years of these statements, use other industry data to explain your projections. Data visualizations can paint a clearer picture than lists of numbers.
Share your funding requirements for the next five years and how you’ll use the money. Suitable uses include paying employees, buying equipment, and paying other bills. Do not intend to use the money to pay yourself, which is an easy way to get a loan rejection.
Investigate Different Lenders
Lending can come from many sources. You can start by discussing your options with your current bank. You might qualify for a loan backed by the Small Business Administration. Such financing gives companies with little or low credit better terms and rates to get on their feet.
You can also consider unique loan options, such as microloans that provide smaller amounts to float you through a short period. Crowdfunding could be another option to get money from the community if you present it correctly and follow the rules. Remember to check the requirements for each lender so you can apply for a loan with everything in order and avoid unnecessary rejection.
Improve Your Credit
Your credit score demonstrates your responsibility. Do everything possible to improve your personal and business score before applying for a loan.
If you have a high debt-to-income ratio, lower it if you can. Review your information with credit bureaus and clear up inaccurate data, if any exists. Institutions use different scoring models, so try to determine which one your preferred lender uses and prioritize that rating.
A business loan can keep you going or help you take advantage of a superb opportunity when all you lack is the cash flow. Apply these suggestions to increase your odds of securing financing.