Entrepreneurship is a passion and if you want to start anything new and you have the ideas and plans don’t let yourself get held back for money. Dealing with banks when it comes to small business loans can be reduced if you are prepared for it. You should always go for reputable source for small personal loans. Read on to know what all you should do to get prepared for a small business loan.
First of all in order to prove that you deserve the money you are applying for, you should prepare some documentation. Your personal credit history in very important in this regard. If your business is a startup and doesn’t have an operating history, then it is based on your personal credit history, that includes your credit score which is a reflection of your creditworthiness. The higher the credit score you have the more you are suitable candidate for a loan. It is assumed that you will operate the business with the same level of responsibility and integrity as you have been doing with your personal finances. Extract a credit report from any of the major credit rating agencies and bring that to the bank as reference.
Secondly, you would be required to get the financial statements of your business. You are required to show how the financial health of your business is. This is done to gauge the exposure limit of your business; that is, what is the worth of your business and how much you are borrowing. In order to make your case stronger, you can also prepare a detailed pro-forma statements. This gives the forward plan of your business.
Lastly, you should have a well updated business plan to show the bank whenever they ask for it. When you prepare a business plan, then you will already have financial statements and pro formas. Your chances of getting a small business loan gets augmented if you have the details chalked out right. In the business plan you should include the bios of you and your partners, your track record, the strategies that you plan to follow and your competitive advantage.
Once you are done with all the documentations, you have to decide upon the bank you are going to borrow money from. It is always a better idea to approach the institutions with which you are already associated. Keeping in mind your past association and financial behavior, you are more likely to get a loan. This is because dealing with an existing customer reduces the risk aspect involved with the loan for the bank. You can start talking with the bank where you have your personal loan account or you have taken your mortgage from. In case you don’t get this option, you should go with somebody who are keen on getting business. There are a lot of financial institutes which are giving offers for small business loans and actively looking for them. You can also ask credit unions for loan. Since these are smaller organizations than bank, you may be able to meet with a higher-level decision making authority and explain your case in person. Many a times larger banks have very stringent rules for small business loans.