How to File for a Business Loan

Money to start a business can come from a variety of sources. Most require you to provide a thorough financial profile.

Difficulty: Moderately challenging

Instructions

Things You'll Need:

• Accounting Services
• Banks
• Business Loans
• Small Business Credit Cards
• Business loans

1. Determine the amount of loan you need and what you will use the money for.

2. Decide on the type of loan you want and whether you want to obtain it from a bank, the Small Business Administration or another type of lender.

3. Develop a balance sheet indicating the status of the company's assets, liabilities and equity.

4. Develop a profit-and-loss statement with a summary covering the company's expenses, revenues and costs for a particular accounting period.

5. Develop cash flow projections by estimating the time frame in which you expect money to flow in and out of the company.

6. Contact prospective lenders and ask them for an application. In many cases, the quickest way to accomplish this is in person, although it can also be done via e-mail, fax or mail.

Tips & Warnings

• If two banks turn you down for a loan, you can apply to one of the Small Business Association's many loan programs.
• Apply for a line of credit at a bank well before you actually need the capital.
• Aspiring business owners with few assets can expect to put up personal assets to secure a loan.
• Personal loans may be the best course for those with an inadequate credit history.
• Those applying for larger loans will most likely have to provide business tax returns, a list of current accounts, a business plan, audited financial statements and an appraisal of assets and liabilities.
• If you can afford it, consult with legal counsel to aid you in reviewing loan documents and their stipulations.
• Be wary of lenders that want to secure your intellectual property as collateral for your loan.

Who Can Help Sponsored

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[plumberi]

on 8/12/2009 All good advise and comments. Thanks

[foxynyc]

on 5/4/2009 good article

on 11/22/2005 Incorrect tip: If two banks turn you down for a loan, you can apply to one of the Small Business Association's many loan programs.

Correct tip: Contact your local office of the U.S. Small Business Administration (www.sba.gov) to determine which local lending institutions participate in the access to capital program. If they work with the SBA, and you meet the qualifications, SBA can offer you a loan guarantee which makes it easier for a bank to lend you money. SBA does not offer direct loans anymore. Sorry.

on 11/22/2005 If family or friend loan money for your business, draw up a formal (doesn't need to be fancy) written, signed statement showing the amount, interest rate (must be near market rate), and payback schedule. If you don't, the IRS will treat it as a gift.