How Can I Get a Loan for a New Business?
Starting a new business can involve a number of challenges, the main one being the issue of financing. Virtually any business that you start will cost money up-front, and it will probably also have a period of loss before it starts to earn a profit. To pay for the business until it starts to earn a profit, you may need a loan, but loans are difficult to get for new businesses.
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Business Plan
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Before you can apply for a business loan, you need to get some idea of your cash requirements, and you need to work out a plan of exactly how you will make the necessary amount of money to pay back the loan. To do this, you must draft a business plan. In this document, you must write out a description of your business, a description of its industry and market sector, an explanation of its strengths and weaknesses and specific plans for how its operations will work. You must also prepare detailed spreadsheets that make revenue and expense projections for three to five years into the future. If you are not confident about your writing skills or if you do not have the time to do this, many firms that specialize in writing business plans can help you.
Establish an Office
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Since your company is new, it will be difficult for you to build a sense of stability and legitimacy for lenders. However, several key things can help. First, you must have an office other than your home. If you cannot afford the rent for an actual office right now, many office rental facilities specialize in helping professionals like yourself by offering virtual office services. By paying for a virtual office, you can list your business's office address as being in an office facility rather than at your home, allowing you to receive mail there. Virtual office services also allow you to have someone answer the telephone in your business's name. Such office services tend to cost a fraction of what a physical office would cost in rent.
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Legal Entity
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Another way of building legitimacy for your business is by establishing it as a legal entity in your state. This may mean setting it up as an LLC, LLLP, LLP, LP, S Corp or C Corp. Study the specific characteristics of each type of legal entity to see which fits your business the best. However, do not fret too much over this decision: If you start your business as an LLC and then later decide that it would function better as a C Corp, you can convert its structure.
Presenting Your Idea
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Prepare a presentation that covers key aspects from your business plan. Include slides with important graphical and numerical information. Practice your presentation so that you can give it in a confident and professional manner. Use this presentation to present your idea to prospective lenders.
Lending Resources
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The U.S. Small Business Administration offers a number of resources for new businesses. One important resource is its collection of guaranteed business loan programs. A guaranteed business loan is backed by the Small Business Administration, making private lenders more willing to issue it.
A number of other resources exist as well. For instance, various websites specialize in helping new businesses to get funding, either from investors or lenders. These websites serve as intermediary parties, helping you to build your business idea and get it out for others to see. However, remember that going through such a website for your funding will mean extra fees.
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