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The obvious reason that a small business owner would require a business loan is best known to him, but for a small business to get off the ground, or to keep operating, it must have financing which is often in the form of a business loan. Unless you plan to fund this business solely with your savings which is not usually recommended or unless you are famously wealthy you’ll need a business loan Small businesses can apply to banks or other financial institutions, like credit unions, for commercial loans. As any borrower can tell you, the better prepared you are for requesting for a business loan, the greater the chance you have of getting the loan.

In this article, we highlight the major steps you should follow through the loan application process.

Business owners, whether their firms are start-ups or existing firms, need to take some time and be able to clearly articulate why they need a business loan and how much they need. Some of this preparation details an understanding of what lenders will need to approve you.  Often, businesses may not be able to address the question of how much they need until they prepare their financial statements as part of their business plan. Lending institutions are not in the business of saying no because majority of their profits are made from issuing loans. But be aware that start-ups are almost always considered risky, and many financiers are reluctant to finance them, they just say it when your application doesn’t meet lending requirements. Also be aware that many lenders won’t even consider small loans, which are less profitable than larger loans but require the same amount of time to evaluate and carry out.

Review your options: So what exactly are lenders looking for? You need to be able to evaluate your options adequately that is, doing your home work properly. Look at the financial institutions available to you. Don’t just patronize the large, national financial institutions. Basically, all lenders are searching for assurances that your business will be able to repay the loan, plus interest. Most lenders will expect the loan to at least be secured either with a business asset or a personal property. You may also consider getting the loan from a smaller regional financial institution, or consider a local credit union, checking their membership requirements and their loan terms if they are what you can work with. Lenders also will be looking at opportunities to profit from your success, so as your business grows, so will your business relationship.

Business Plan: This may be your most important step. You have to be able to prepare a good business plan in order to get a business loan from just about any lender. In fact, until you have a good business plan, the chances of you knowing how much you need and how fast you can repay it are slim. Your written business should include goals and action steps, timetable, resource allocation, funding required, and related financial data showing, your current, complete business asset and liability( statement of financial position), your current, complete business statement of income and expenses (your profit and loss statement, or P&L). Business plans consist of many parts. A good business plan will have several years of past and project financial statements for your business, it should detail the sole purpose of obtaining the loan, a repayment plan stating how much you need and what is your specific road map for repayment, a statement of collateral what assets, business or personal, do you intend to use, their market value, and if part or all of the asset can be used as collateral. You will need to include an analysis of the market your business will serve as well as a statement of your own experience.


Present your application: Once you’re ready to make your request, Make an appointment with the financial institution or your loan provider and request enough time to do a short presentation, based on your business plan. Be clear concise, organised and precise. Put together a complete package to hand to your Lenders with a narrative plus any financial statements. Be sure to look your best, be professional, swift and sharp when making the presentation. And what do you do if you are not granted the loan, I know this can be frustrating but the secret is not to give up, find the reasons for the rejection and correct it, was it a missing piece of information, wrong timing, or a procedural thing. Ask what you would need to correct to get a yes next time. Note also that you don’t have to remain with that particular financial institution, you can either alter the application accordingly and resubmit it, or take the application elsewhere. And if you keep getting rejected, you can consider alternative sources of funding. Many new entrepreneurs seek out funding from family and friendsOpens a New Window.. Some use their available finances to finance their businesses. If the rejection often comes from a commercial bank, consider alternative lenders like community banks, credit unions, such as co-operatives many of which specialty is in small business loans. Also your application will require a guarantor, who would be held responsible by the financial institution. Having a guarantor assures the lender that the risk is worth taken and increases his chances of getting back the loan in a case where you do not meet up with the payment plans.


Finally applying for loan can be daunting, with getting the necessary requirements to get the loan can be a very technical process, so you need to know the pros and cons of the application process, and you can enlist the help of a professional, especially developing a clear and concise business plan. Considering the vast knowledge and expertise the professional has makes it advantageous to get professional assistance. So start make preparations to apply for a loan, and get that business of yours off the ground, turning your dream business into reality and becoming that entrepreneur you have always wanted to become.

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