How to Get a New Business Loan

Small business loans are hard to get unless you can guarantee payment.

Securing a loan for a new business is challenging because lenders will have little guarantee your business can succeed. As a result, there is little guarantee you will be able to repay the debt. If you can supply the lender with reason to believe your business will succeed and your loan will be repaid, you will have a much easier time securing your financing. There are several ways to give a lender these assurances, including a quality business plan, a strong credit report and a loan guaranty.

Things You'll Need

• Business plan
• Credit report
• Capital or collateral
• Loan guaranty or insurance

Instructions

1. Create a business plan. This should be the area where you dedicate the most time during your loan application process. Your business plan will not only help you get a loan, it will also be a model for your operations in the future. For help writing your first business plan, consult the Small Business Administration (SBA) website. The best business plans will show a lender or investors the business is not only a great idea but is poised to make a large profit.

2. Enhance your credit. Since this is a new business, it will not have individual credit to supply for a loan. Instead, your personal credit will carry you through the loan process. Help your credit by making payments on all loans for at least two years prior to seeking your business financing. Further, reduce the balances on your debts by paying down as much as possible prior to taking your new loan.

3. Report business assets. You may have solid assets, such as real estate, that you are planning to use for collateral on the loan. Otherwise, you will need to supply a record of financial assets. For business owners with low initial capital, consider using investor funds to build your asset list.

4. Submit an application. Apply to a business lender of your choice. Include your business plan, credit report and secondary documents such as appraisals of your collateral. Consider providing the lender with a "snapshot" document of your qualifications, since a full business plan and loan application can be quite lengthy. Remember: You only get one chance at this impression, so be sure to present professional documents.

5. Seek an SBA guaranty. This is supplemental loan insurance on your debt, and it can make the cost of the loan much lower. If you qualify for an SBA guaranty, the lender will be taking on little risk in issuing your loan. The lender may even notify you that you will need an SBA guaranty to gain approval for the debt. To streamline the process, start by working with an SBA-qualified lender (SBA.gov).

References

• SBA.gov: Financial Assistance Information