How to Finance a Small Business With Major Banks
You can start a small business on a shoestring budget, but your odds of success increase with careful planning and more finances. The large majority of new businesses fail for many reasons related to lack of capital. Give yourself a hand up by obtaining the resources to see you through the almost inevitable rough patches any new business faces.
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Instructions
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Prepare a detailed and comprehensive business plan. At a minimum, include a statement of purpose, a description of the business, a marketing plan, operating procedures, employees/personnel, details of business insurance, financial data (balance sheet, break-even analysis,cash flow report) and supporting documents such as tax returns, leases, etc. A professionally prepared business plan will get your banker's attention and is your best tool to help you get a loan to finance your business. This is particularly the case when dealing with large banks that often have regulatory documentation standards to uphold when issuing commercial loans.
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Contact your bank regarding the money you want to borrow to finance your small business. All major banks have a small-business loan department, and some large banks even specialize in smaller commercial loans. However, you are usually best off checking with your bank first, especially if you have been a long-term customer as personal relationships absolutely do make a difference in getting loans. If you are seeking a start-up loan rather than a loan to expand an operating business you should expect extra scrutiny because there is more risk in a start-up business.
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Shop around. Banks and bankers are all different, and regardless of economic circumstances, some are more willing to loan to specific types of small businesses than others. There are also wide geographic differences in small-business loan availability. Some areas have a glut of coffee shops, for example, and banks simply won't loan money to start up new coffee shops in those areas.
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Plan to invest some of your own money. Banks look very favorably (and sometimes insist) on the owners of a new business putting up a reasonable percentage of the investment capital themselves (and/or pledging personal collateral for the loan such as real estate, stock holdings, etc.).
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References
- Photo Credit business plan 2 image by Kelly Young from Fotolia.com
