Like many things in business, obtaining a small business loan can be challenging. But you’re an entrepreneur, so it doesn’t matter how tall the mountain is, you’re still willing to climb it, right? Right!
Hi, my name is Kevin Foreman and I’m the President of Bsbcon. I’ve helped hundreds of entrepreneurs receive funding for their small businesses, and most importantly I’ve done it myself. In this article I will take you step by step through the funding process and explain how to get a small business loan for your company.
To start you will need to perform market research and ensure your business will be viable. Next, you need to create a business plan. Having a comprehensive business plan will be a key part to securing small business funding. If you are looking for a place to start, take a look at our business plan template.
Considering you have completed these steps, you will then want to shop around for new business loans. Make a list of the small business loans you think you will qualify for, and begin to identify which are the best small business loans available. From there, reach out to professionals at each institution. Ask them about their funding programs, and request that they review your business plan. There is a good chance you will learn things about their programs you didn’t previously know. This will allow you to narrow down which programs you have the highest likelihood of success with.
Now, go back to the drawing board. Revise your business plan based on the feedback you received and the criteria of their programs. Now you are ready to apply!
To be clear – your chances of success will be primarily determined by your personal credit rating, your corporate credit rating and your business plan. We will save those topics for another article, but for today let’s focus on what you can actually do to capitalize on a start up business loan.
Presentation Is Key
From how you respond in emails, to your tone on phone calls, to how you act and appear in person. Let it be clear, you are being judged, and by acting as professional and genuine as you can, you will greatly increase your likelihood of success.
Remember that in many situations a banker is putting themselves and their own livelihood on the line by recommending your application to their superior or the underwriter of the loan.
If you are a person of integrity and a likable person this will help instill trust in you, and make them confident you will repay the loan.
Know Your Numbers
The financial institution will surely have questions. You must be an expert on your business, the industry and of course your business plan. This includes your financial projections.
You must know the reasoning for every aspect of your business plan, and have a clear explanation of each dollar earned, spent and accounted for.
Behind every number is a story. It is your job to educate the financier on what the capital will be spent on, and why it makes business sense to use the funds for this activity.
Be cautious, but do not be afraid. Of course a banker will want to loan you money for a hard asset like a brand new vehicle or an expensive piece of machinery. If anything goes wrong the bank can seize the item and auction it off for a partial amount of the loan; therefore, minimizing their risk.
However, a loan for marketing, a cash float, or working capital is much less appealing to provide to a startup. If things don’t go as planned the bank will have minimal options in returning their capital.
The point being, you can ask for working capital, you just need a clear explanation of why you need it, how long you will use it, and when you can see the return on investment (ROI).
Have Questions? Looking To Get Started?
Invest Your Own Money
If the bank sees you haven’t invested your own money in the company they certainly won’t invest theirs. By showing you have poured your own money into the startup, you can instill trust that you are committed to the business for the long haul.
Choose the Best Bank for Small Business
Choose the bank or credit union which other entrepreneurs have had positive experiences with. You never know when you will need another loan, or line of credit.
It is so much easier to choose a supportive lender from the get go, establish a relationship, and pave the way to new small business financing opportunities.
Analyze the Offer
You need to understand every detail about the loan. If you are like me, you will first review the loan terms, create a few questions and then speak directly to the lender about these queries.
As a rule of thumb, you should not only read the entire loan agreement, but in fact be proficient in the meaning of each clause before signing or agreeing to anything.
Don’t Be Too Picky
In business, “time” is a factor that doesn’t get discussed nearly enough. If you have an offer in front of you, assess it, compare it to others, and move swiftly into either closing it or finding the next best opportunity.
We deal with entrepreneurs from time to time that are picky about a percentage or two of interest. Honestly, if you are pouring your life savings into a business, asking friends and family for love money, plus securing a start-up business loan, you should not be concerned about small amounts of interest, in my opinion.
Your idea must be so grand that you are in it for the long haul, and likely foresee a large financial return over the coming years; therefore, if a fair deal is looking directly at you, take it before it goes stale.
Every step of the way. Be transparent about yourself, the business, any challenges you may encounter.
Lenders want to work with honest, integrity-driven individuals that respect them by telling them the truth. If you were to sit in front of a lender and not tell them the absolute truth, how could they ever trust your promise to repay the loan?
Trust me when I say that honesty is a strength, and that it will save everyone’s time.
The reality is, like anything, your first small business loan application may not be the best or most efficient. If this is the case, it’s ok!
You are going to learn so much in the process. Instead of being anxious or concerned, be confident, learn everything you can, and represent your company with positivity. Your vendors, staff and management team are relying on you to tell your company’s story in the best possible way.
Let's Get Started!