In case you want to found a company or to expand your current business, but you don’t have enough money in your hand, you have the possibility to take out a loan from your local credit union, bank or lender company. You will be accepted into the plan only in case you prove that the business is a good investment. In case you have new products and you want to penetrate a market, you will get the loan only if you have a business strategy. New companies will be accepted harder into the loan program because the lender company assumes a bigger risk. You can prove that your business is a good investment if you create a detailed business plan that contains the marketing mix and all the steps which shows how the business will work, how it will make profit and others.
Some banks offer loans only for individuals who have a good credit score and they set collateral, which can be a vehicle, computer, camera or even a real estate. The collateral is important because your lender has to make sure that you will repay the borrowed amount of funds. In case you default on your loan, the bank has the right to take your collateral. In order to secure a loan, improve your credit score by paying off all your bills on time. In case you don’t have a good credit report, you have the possibility to ask for someone to co-sign. A co-signer is someone who promises to pay in case you cannot and he/she will hold partially your loan. If your local bank or financial institution approves your application, you have to sign the loan agreement. Sign it only in case you understand its terms and conditions. Sometimes the application includes among the borrower’s and lender’s name, their phone number and address, the reason why is taken out the loan. In addition, create a business plan and show it to your lender company.
How to get a small business loan?
If you want to take out a small business loan, you should take in consideration some basic instructions. Taking in consideration that jobs scare, nowadays many individuals are starting their new business. In order to secure a loan, first of all, you have to write a detailed business strategy that is available for three years. You have to include the marketing mix and the cash flow plans for each month. The second step is to make an online research. You can find detailed descriptions about financial institutions at the Better Business Bureau’s website (BBB). Because most banks were hit by the economical recession, small business loans are difficult to obtain especially from national banks. In order to secure a loan, make a phone call or discuss with the bank manager personally and set an appointment to discuss your business strategy.
The next step to get a small business loan is to note your debt-to-income monthly ratio. This tip is important because the financial institution has to verify that you are personally solvent in applying for your loan. In order to prove how much you made over the last few years, verify your income tax returns. Other important factors that affect the loans are your knowledge, experience and training in the industry, your credit history and report. You will be accepted easily into the loan program if you have at least five years experience in the field of business for which you are applying. Then you have to set collateral even it is a risky process. Before you make a final decision, compare the offers because the interest rates will change among states. In order to apply for a loan, complete a form online or personally and wait for an answer.
Types of small business loans
Within small business loans, you have the possibility to choose between different plans including credit, actual cash or a lease. The banks, credit unions and lender companies require a business plan, which proves that your company is a good investment and you can repay the borrowed amount of money before the period is finished. You can get a small business loan easily if you have a good credit score and proof of business income. One type of business loan is the working capital lines of credit. This type of plan can be as long as five years or as short as 75 days. You can choose the program, which best suits your needs. In case you want to manage cash flow, choose the revolving credit card loan.
Thanks to this loan you can purchase items that your business currently doesn’t have cash for. Another type of small business loan is the accounts-receivable loan, which was created for funds that are expected to be received by the business customers or clients. If you have a prepared business plan and a detailed history of operations, you can apply for another small business loan type, named equipment leasing. The third type of business loan is the letters of credit, which has an intermediary. This small business loan is used especially for international trade. Before you make a decision, discuss your choice with a bank manager, because he/she has more experience. Pay off all your bills and improve your credit report.
Credit unions, banks or any other financial institutions offer to their customers the possibility to do their banking online, so you can verify your credit card whenever you want. If you want to found a new company, it is better to apply for development programs in your state, because it might happen that you cannot make the payments on time, you are delinquent on your loan, and the bank will take your collateral. Association for Enterprise Opportunity, abbreviated AEO is one of the main programs that support small businesses. Make an informed choice!