How to Get a Business Loan Approved
Most business startups need between $5,000 and $50,000 to get going, Entrepreneur.com says. Even when the economy is good, bankers can be cautious about lending money to a new business, because most new businesses fail. An established business that needs capital to stay afloat may also look like a risky investment. No matter how confident you are in your own success, bankers will carefully check out the chances for failure. Still, with careful preparation, you may be able to win approval for your business loan.
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Instructions
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Clear up your credit history. Most banks use an automated process to evaluate loans, Entrepreneur.com says, particularly loans under $250,000. Plugging in your credit score is the simplest, quickest way to process your request. You can order a credit report free from the Annual Credit Report website (see Resources) --- your exact score costs more --- so you can check for errors and clear them up before the bank checks up on you.
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Draft a business plan. A good business plan, according to the Small Business Administration, will detail your financial projections, marketing plans and the reasons your business can succeed. Back all that up with hard data. Your plan should also explain exactly what you intend to do with the money, how it will boost your profits and how soon you can pay it back.
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Provide the lender with documentation of your income, cash flow, expenses and other financial data. If your credit is good enough, your lender will look at your business in more detail. Be ready to produce the information in a readable, well-organized format as soon as you're asked for it. If your suppliers or customers are willing to write letters of recommendation, include that too.
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Anticipate the banker's objections. If you're switching fields completely --- from marketing software to running a plumbing company, for instance --- you'll need to show why you're qualified as a plumber. Alternatively, you can show that your partner is a veteran plumber who can handle the technical aspects while you handle the marketing.
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Tips & Warnings
The Small Business Administration doesn't loan out money, but it does insure loans to businesses, giving lenders more confidence that they won't lose money on the deal. However, the SBA doesn't usually guarantee loans unless a business has three years of financial history to go by, says Entrepreneur.com.
Don't give up. If one lender turns you down, it's possible another will react differently.
If you're looking for money to cover seasonal or occasional expenses, consider applying for a line of credit rather than a one-time loan.
