By David Simmons
Starting a business is an extremely difficult task, especially in the current economy. Getting approved for a bank loan can help you greatly with your business. Here is a guide to getting a bank loan so that you don’t have to give up on your entrepreneurial dreams.
Highlight Previous Business Experience
Banks have to take a risk in loaning you money, and the purpose of the whole approval system is to make sure that you will be able to return the loan you take. Your previous experience will assure the lender that you are not new to the entrepreneur game. Your job experience can show that you are hardworking and determined. These qualities are appreciated by lenders. So, highlighting your previous work and job experience can significantly increase your odds of getting approved.
Don’t Delay the Process
The process of getting a loan can take weeks to complete. And if you don’t start the process in time you may end up in a lot of trouble. We all understand how important funds can be during the startup. If they are not available to you due to a delay on the loan acquiring process, then you may miss some great opportunities and taking a loss even before the business has properly started. So, assess the situation and start the process at least two to three weeks before you need the money.
Improve Your Personal and Business Credit Score
If you are applying to get a loan for a startup, then the bank can judge your case based on your business credit score, so they will have to consider your personal credit, too. A good personal credit score can have a significant impact on your ability to get qualified for a loan. To improve your personal credit score, you should pay your bills on time, and you should lower your outstanding loan and credit card debt.
Once you have started the business, also keep a strong business credit score by getting all the necessary licenses and getting a business credit card. This will make it easy for you to get loans in the future if you want to expand or improve your business.
Prepare a Plan and Present It Properly
Of course, the bank is not just going to hand you the money. They need to know how you will invest the loan so that they can judge the case properly. You need to make the lenders believe that you are worth the risk. So, prepare a presentation that explains your idea and shows how your business will be profitable. Use calculations to determine exactly how profitable the business will be and present it to the lender in a simple and easy to understand manner.
In this presentation, you will have to show the ownership and management information, a company overview, a market analysis, a market plan and financial projections. You need to show that how your product will be better than your competitors and how will it be more valuable. Your financial projections should provide a realistic analysis of the performance of your business over the next couple of years, and you should also show the lenders your exact plan for returning the loan.
Be careful while applying for a loan and don’t get into an agreement that might not be suitable for you. Running a business requires a high level of determination and commitment. Don’t apply for a loan until you are completely confident that you will be able to return it.
Also, keep in mind that you will have to place some assets as collateral and most people who are starting a business have to place their personal assets for this purpose. They have to get a mortgage on their house, and many people end up getting their homes foreclosed when they are unable to pay back the loan. So, be careful and get an expert or a lawyer to look at the agreement for you to make sure that you get the deal that best suits you.