When it comes to starting a small business, the first thing in your mind is succeeding and creating abundance for yourself and your loved ones. But the fact of the matter is that you need capital to simply get the ball rolling. Surveys on small businesses show that many can start with as little as $5,000 but that as many as 58 percent of small businesses need up to $25,000 to begin their journey to success.
Set yourself up right when you learn how to apply for business loans, and get them. Just follow these simple steps.
How to Apply for Business Loans Properly
When it comes to starting up a business, you want to be completely confident that you are going to succeed. Otherwise, why start at all?
But 65 percent of business owners say they are not completely confident they have enough to start. Further, 93 percent assert that they don’t believe their business will run longer than 18 months.
When you are learning how to apply for business loans, you want to do it right.
The first step will be getting your credit in order.
Before you begin, make sure you are removing these 5 habits to protect your credit standing.
Once you have begun this process, you need to be clear about why you need a business loan. You need to be crystal clear.
Knowing you need money to start, isn’t enough. The more specific you are, the easier your chances.
Do you just need money? Or do you know that you need money for payroll for X amount of employees, coolers for food, special lighting for products, and the list goes on and on.
Be specific, and be credit-ready.
Calculate How Much You Need
One of the first questions the Small Business Administration Office (SBA), or any bank, will ask is, how much do you want?
Just having a blanket number in mind with not much to back it up will be the first step towards getting declined. Instead, go in showing you’ve done your number crunching.
There are a number of ways that you can do this.
There are multiple business loan calculators online that can be a good starting point towards this number crunching.
You also want to do some calculations on your debt service coverage ratio. In other words, you need to know what kind of debt load you can afford.
Small business loan administrators aren’t going to give you a blanket amount without this knowledge. They need to know what your income is, what your business revenue will be, and if you can afford your loan payments.
Business loan calculators and debt service ratio calculators give you the numbers you need to know to show loan officers. They want to know you’ve done your homework.
Know What Kind of Loan You Need
There are a number of different kinds of business loans you can apply for. Some small and short-term loans can be found online.
You can get a credit line or equity line at your bank if you already have something as collateral. But you don’t have to put up your house to get a business loan.
The Small Business Administration (SBA) office is a very popular choice to try out first, as they are very willing to invest in new businesses that will stimulate the local economy. They offer higher interest rates, and SBA payments may be a bit higher.
But at the end of the day, you get peace of mind.
The SBA office isn’t the one that gives the loan, but they will start off by guaranteeing a portion of your loan to the banks that they refer your application to. This makes you a lower risk to the bank and also ups your chances of getting accepted.
There are a few different options for SBA loans. One is the 7 (a) program that provides loans up to five million dollars, and you can use it as your working capital.
Then there are microloan programs that offer loans up to $50 thousand. If you are looking into commercial real estate type businesses, the SBA has a loan for that as well.
Get Your Documents in Order
So you’ve worked on your credit-readiness, done your number crunching, and know exactly what you need in a business loan. You’ve should have also done your research as to exactly what kind of small business loan you want.
Now all you have to do is get the actual paperwork rolling.
If you’re starting off self-employed, be sure you know what you need to provide your proof of income to the bank or SBA.
Have all of your banking paperwork handy and all of your proof of income statements ready. You also want to have copies of your credit reports from all of the reporting agencies, so that you know what’s what.
If a bank or loan officer comes back saying there’s an issue on your credit report, you want to know their information is accurate. Even more importantly, if you get your credit report before you apply, you’ll be able to spot those potential problems before they even become a problem.
Before you apply for your small business loan, have that credit report cleaned up if necessary, or corrections made if necessary.
If you are self-employed, you may also want to get some letters of reference from your clients confirming your earnings.
The more information you have before you apply, the better. Have your income statements ready, bank statements ready, and credit reports on hand.
You also want to have any data or proof of your assets or equity that you can use for collateral if necessary.
Now you’re ready to close the deal!
Close Your Business Loan
Small businesses are important to the economy and critically important to any community’s growth. When you succeed, the community succeeds, everybody does well.
Small businesses are job creators, and the government really likes them. So you should never be afraid to start a small business or seek a small business loan.
The government wants to invest in your growth because it is an investment in their growth. In 2014, small businesses added 1.4 million jobs to the economy according to the Small Business Administration office.
Be part of that success story when you are ready to close your business loan. Understand how to apply for business loans, and learn how to survive the first year in business today.