Friday, November 26, 2010

9 ways to go about getting that small business loan

If you are applying for a small business loan, you should get a few things sorted out before you do so and most of these thoughts are to do with the loan criteria as spelled out by the lender. Some organizations are just more wary of risk than everyone else and will be very stringent in the way they approve applications. In order to pass muster and have a successful application here's 9 things you must keep in mind.

The reason

First up, make sure that you have a clear cut reason for the loan, something that ties in with your business and your stated field of expertise. If your loan amount covers multiple items, cover each of these items with reasons for why you need them.
Simple numbers

Sometimes cold hard numbers are all you need, so simply state the amount you need, the repayment terms you are seeking and the tenure of the loan. For instance, this could be a loan of $20,000 for a period of 4 years and a quarterly payment option.

Details of repayment

Banks always are keen to hear how you will be able to finance the loan that you are about to get from them, so you should know how you will service the loan. An answer of “By way of profits from reduced running costs” is a lot more desirable than a simple “I just will”.
Security and collateral details

Offer details of the collateral you are offering to the lender and this will probably go quite some way in soothing any concerns that the lender might have. If you are not going to be prepared to put anything on the line, why would they?

Show off your business plan

You need to be able to come up with a business plan that will answer any essential questions that the lender might have pertaining to your business. This could be market information, your own credentials, your line of business or anything else.

Financial statements

Including financial statements is a savvy move since you will need to present financial information, preferably churned out by some accounting software and verified by your accountant and/or tax advisor.

Management account

Again, your accounting software can produce a set of management accounts for the lender's perusal and this can strengthen your case.

Accounts receivables and payables report

This will help a bank get a clearer idea of your debtors and creditors and it will likely help your cause if if this is supportive of your application for a loan.

Principals financial statements

This will be needed if some sort of collateral is offered up by you to the lender, so make sure you keep this close at hand.


If you are a new company, the emphasis is going to be on your business plan , and the security (also called collateral) you or your business can provide against the loan.

You must take the time to practice presenting your case to the bank or lender to iron out any glitches. Practice on your colleagues and family (you never know, they might be so impressed, they'll invest or lend!). It may help to role play the lender and come up with as many pointy questions as possible. The more time you take the better your chances will be. (But remember, don’t fall into the analysis paralysis trap!)

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