Small Loans for Business Owner

By Deliyami Yeo

small business loans

Getting a small business loan is a big deal to a small business. It can mean the difference between being able to continue operations or have to shut down, extra financing is sometimes necessary to propel your business to the next stage of growth.

Be prepared to have several key documents on hand before you even set foot in a bank. These should include personal financial statements, tax returns, monthly cash flow projections, and a well-prepared business plan. Established businesses should also produce references from suppliers and customers.

If you need financing for your small business and are considering a commercial bank as one of your potential sources of financing, your likelihood of getting a loan depends on a few different factors:

Your history with a particular bank

You will most likely have a better chance of getting a small business loan from a bank that knows you personally. It may be a bank where you are using their services. If you have been with the bank for a number of years, and they can verify that you have been timely in meeting payments on other types of credits and loans, your chances will improve considerably.

Your personal investment and commitment to the business

A lender will most likely expect to see that you have your own resources invested in the business. This shows that you are serious about the endeavor and are committed to making it a success.

Your personal financial history and credit rating

Your personal credit score will be an important factor if your small business is a sole proprietorship, and especially if you are just starting out with your own business, since this may be the only basis on which the lender can evaluate your ability to repay the loan.

The purpose of your loan request

Lenders like to have assurance of your ability to repay, and therefore they want to know how the proceeds of the loan will be used. If the loan is for purchasing property or capital goods, such as equipment, to get your business started, you may be able to offer these as collateral. This provides the lender with additional assurance.

How you intend to repay the loan

This is obviously the key factor in getting the loan, and represents the convincing argument you will need to make. The point here is to show, in tangible form, how you expect to generate the cash flow necessary to make the loan payments on time.

If you are requesting additional financing for an ongoing business with demonstrated profitability and a good repayment history on previous loans, potential lenders will probably feel more comfortable with extending you the credit than they will if you are just starting a new business without a proven track record.

Your preparedness

You should be clear and specific about what you are requesting. If you need consulting and advice about how much financing to request and over what term, you should obtain this advice before going to a lender to request a loan, unless you are confident that your bank can offer you business advice and counseling, and then talk about a loan.

Final Note

When requesting a loan, you should try to put yourself in the potential lender’s position. You know your business, and are confident about its results and your ability to repay the loan. You need to convey that same confidence to the lender. Your enthusiasm about a new business you are just starting up, or about your plans for expansion or a new opportunity is an important factor. But lenders are in the business of making loans that will be repaid.

You should also keep in mind that the person you are dealing with (a loan officer) probably has to make an objective case that will be approved by someone else. So if you can back up your enthusiasm with as much hard data as possible, you will greatly improve your chances of getting the loan and getting on with business.

Just thought you may be interested in reading this guide: Home refinancing and CD rates

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