Getting Approved for Start Up Business Loans
Many times, start-up businesses will find that it is difficult to secure financing even in the best times. Times like now, when we are in the middle of an economic slowdown can be near impossible. If you want to maximize your chances of being approved for the funds your business needs then pay close attention to the following paragraphs. Normally, in order to be approved for a business loan you will need to have been in business for a minimum of 2 years. Often, you will also need to have a good personal credit record. Nowadays, there are more lender options for you to choose from than just big banks and as a result, the process is becoming easier.
Own a Home
Home owners are people who have already established a credit history that involves borrowing funds and they are also in possession of a home that can be used as collateral. Lenders are quite conscious of the risks that they are taking and startup businesses are a risk that is considered to be in the high bracket. The lender might need to depend on the assets that you already have in order to pay the debt off if your business flounders.
List all of your Assets
The amount of money that you might be able to borrow will be determined most of the time by the amount of collateral that you have. In businesses, there might be more than a single person who is applying for the loan and if so then each person on the application needs to list all of their assets in order to get the highest amount of funding.
Things that can be considered assets can include but are not limited to:
· Vehicles
· Bonds
· Shares
· Property
· Cash
Have a Good Record of Income
Have your old W2’s on hand to be able to show that you have a history of earning. Yes, this will be affected by starting a business but it will show that you are capable of earning and will make the lender more open to the idea of the loan.
Show Where the Money will go
This is incredibly important. If a lender knows exactly where the money will be going then they can determine if your application is one that is feasible. If you apply for a $50,000 loan and don’t tell the lender what it is for then it might be immediately rejected. On the other hand, if you apply for a $100,000 loan and have the funds itemized and prioritized then you have a better chance of being approved.
Always remember to use the tools that you have at hand when you are filling out your loan application. Just as there are calculators for mortgages, there is also the option for you to use a business loan calculator. These can be found on many different web sites and are free to use.
As opposed to getting a business loan, you might also think about getting a business line of credit. This can assist with getting the business up and running. It can also be better than trying to get a loan because of the fact that you will only be charged interest for the portion of the money that is actually used. In addition, it can help to establish the credit worthiness of your business.
The process of obtaining this is similar to the loan application process.
Step 1
Make a written business plan. This will show how you plan to earn money that will be used to make the necessary payments for this line of credit.
Step 2
Make sure that your credit score is not atrocious. Because the business is new it may not have an established credit history. This means that your credit score will be the one that is checked for the approval or denial of this line of credit. If your score happens to be too low then you might be denied outright or if you are approved, there may be an exorbitant amount of interest charged.
Step 3
Apply for credit cards for your business. Research them and see which ones will offer a small amount of credit. Also be sure to compare fees and interest rates.
Step 4
Have a conversation with the bank regarding a line of credit for your business. If the amount that you need is in excess of $10,000 then the bank will be the place to start. See what they require and get what you need together. This could be things like a business tax ID number, a business plan and bank statements for the business. Weigh your options and see of it will be better for you to get a small business loan for your startup or if a business line of credit will get you through.