When a person is looking to open a small business there is a very good chance they are going to need to get a small business loan to handle the start up costs. Many people do not know where to begin when applying for a loan. There are some tips and advice for people looking to get a loan to start up their small business.
When a lender is looking at an application for small business loans the loan must be used for a sound business purpose. The business must be legitimate and the lender is going to want to know how the money is going to be used. The applicant should supply the lender with information on how they are going to use the money to make a profit and help their business grow.
The applicant and any business partners they may have to have a good credit history. They must pay back any existing personal loans and pay them on time. The lender will also check reference to make sure they are of good character.
The applicant is going to have to put up some type of collateral for the loan. This can include both personal and business assets. The lender wants to be assured the applicant will have the ability to pay back the loan even if their business is slow to take off.
When applying for the loan the lender will require certain information from the applicant. They are going to ask for a personal credit history and credit score. If the applicant has previously owned a business the lender will also want to see the business credit history to make sure there are not outstanding loans or financial obligations.
The applicant will also have to have a financial statement prepared as to how the money is going to be used. This includes start up costs, physical location of the business, and money that will go toward inventory and advertising. The business plan should also include projected growth for a period of at least one year. The applicant also has to write a personal guarantee for the business.
This is just some of the information lenders will be looking for when deciding if they are going to give an applicant a small business loan. They need to be assured they will get their money back and want to make sure the business they are investing in will give them a return on their money.