How to Borrow Money for Business

Your business idea cannot get off the ground without a substantial startup budget. You may have some personal savings, property and other assets that can be mobilized to help you fulfill your dreams of being an entrepreneur. But if you are like most owners, you will need to borrow money wisely for your business to move to the next level.

Things You'll Need

• Inventory forms
• Itemized yearly budget
• Credit report
• Accounting books

Instructions

1. Compile the credit reports of everyone involved in obtaining money for the business. Lenders need to have updated credit scores for you and your partners to determine your ability to repay the loan. You should purchase new reports several days before handing in your loan application.

2. Bring your inventory lists and accounting books to the lender's office as you complete the application process. Inventory materials give loan officers a glimpse at the number of products you have sold as a way of projecting future success. Your accounting books allow banks to determine your overall financial situation.

3. Choose the length of lending terms early in the process to borrow the right amount of money. Short-term loans have higher monthly payments but usually have lower interest rates to help out borrowers. Long-term loans benefit from a longer repayment period but use higher interest rates.

4. Select property, stocks and other assets to use as collateral for large loans. Your collateral needs to cover a substantial amount of the loan payoff, so real estate is a popular choice of collateral for small business people.

5. Feel out the flexibility of a business lender on first contact to determine your style of negotiation. You should request as much information on the lender's practices and loan agreements in your first meeting to help you save on interest rates or loan fees.

6. Offer a tangible return for co-signers and investors who help you land a loan. Many business people who have several co-signers offer office space, equipment rental or free services to friends and colleagues to repay their willingness to put their credit on the line.

7. Research state and federal government small business loans. These loans are low-interest financial tools that are designed to help business people get started without high financial burden.

Tips & Warnings

• Create an itemized budget for the next year before you borrow money for your business. Project rent payments, wages and routine maintenance fees as part of this budget in anticipation of major expenses. Your specific budget will give lenders confidence, while providing you a picture of how much money you need to borrow.