If you are considering applying for a business loan, there are many things you should consider.
First, you should know just how much money you actually need. The temptation is to go for the maximum amount. But you should know not only how much you really need, but also, how much you can actually repay. In your written business proposal, you should state the exact amount of money you would like to borrow.
You should expect that when you meet with a loan officer regarding your business loan, you will be asked what your plans are for using the money you receive. If the plan is to expand your business, you should be prepared to answer that, and to tell exactly how you plan to accomplish it. If you plan to purchase more equipment or inventory, be prepared to tell what kind of equipment you plan to purchase, or what kind of inventory you will buy and your plan to market it for resale. By knowing these things, you’ll show a lender that you truly have a plan and a purpose for the loan.
Every lender will want to know when you expect to repay the loan. You must be prepared to answer confidently, giving a clear answer.
Lenders will also ask what you will do if you aren’t approved for the loan. You should also be prepared with an answer for this. This will show a lender you are confident, and that you are serious about getting the loan you need, regardless of whether you are turned down by any lenders.
Of course, one thing every lender will ask for is collateral. If you have a personal asset or business property that you can use for collateral, you should be prepared to provide proof that you can and will put it on the table. What collateral you offer, as well as the fact that you are willing to provide it, may mean a lower interest rate and more flexible payment terms.
As you prepare to ask for that loan, be sure you have checked your personal credit history, and correct errors or improve it.
Another item you must pay attention to is your business plan. It has to be realistic, while being concise. Be sure to include your projections for the next two to five years.
And last of all, stay positive. If you are positive and have confidence in the plan you have developed, it’s much more likely that a lender will do the same.
Angye M. is the contributing editor for America One Unsecured, a loan consulting company that helps consumers obtain personal loans and business loans in all 50 states.