How to Get a Small Business Loan
by Veronica Stone on October 31st, 2007
A small business loan helps small businesses by providing working capital to buy inventory, supplies, a building or other things that your business needs. This can be helpful to business owners who are just starting out, or who need a little breathing room as far as purchasing things for their business. It is basically a certain amount of money that a lender gives to a small business with the agreement of how to pay it back, how much interest will be paid, and how long it will take to finish paying it back.
There are different types of small business loans. If you are applying for an unsecured business loan, you are trying to get a loan based on your credit score. To get an unsecured loan without any sort of collateral, you will probably need a very high credit score with no blemishes against your record. In order to qualify for a small business loan, you should know what your credit score is. There are other qualifications for getting a small business loan as well.
You will need to supply the lender with several things in order to qualify. Along with the initial application for the loan, you will also have to provide a purpose for the loan. This means a statement of what the loan will be for. Do you need money to purchase inventory, hire employees, or rent a storefront? You may also have to let the lender know about the business history and provide financial statements for the business for the past three years. Some lenders will ask for the amount that the owner has invested in the company to this point. Some other things that you might need are:
* Lease Details
* Signed Personal Financial Statements
* Projections of Cash Flow, Income and Expenses
* Personal Resume
Generally, lenders look for a good character, the ability to pay back the loan, and adequate equity or investment in the business. If you don’t have a great personal credit record, you may need some type of collateral to put up for the loan. This could be property, a home, or even an automobile. This is called a secured loan.
It can be overwhelming to a small business owner to try and figure out the steps for getting a loan. The first thing you should do is speak to lenders about your needs. For small businesses, the best place to start might be the Small Business Administration. There are many other lenders, though, that will help you as well. A loan officer will help you determine what to borrow, and will let you know what you need to submit in order to qualify. One great thing about a small business loan is that once you have paid it off on time and without late payments, you will be able to qualify for a larger or faster loan in the future. That’s why it’s important to stay on track with the payments and make sure that each one arrives on time or early. A small business loan can be a great benefit to a company that is just starting out, or that just needs that extra push.