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Blog -
Your business plan can make or break your chances of obtaining a small business loan (Sep-18-2008)
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Many small business owners find that one of their most difficult tasks is finding the money to operate their businesses. Sooner or later most seek to obtain a small business loan. Clinching the loan deal requires demonstrating that providing you with a small business loan is a low-risk proposition.
The most important task to obtain a small business loan is preparing a business plan. When evaluating your loan application, most lenders will look at your personal credit history, business plan, experience, education, and the feasibility of the business you are starting or expanding. A well-written business plan can make or break the deal, as it is the document that will provide the answers to most of the questions that lending institutions ask:
• How much money do you need? Accuracy is important, so request enough money for your foreseeable needs – especially if you are starting a new business.
• What do you plan to do with the money? Lenders will want to see a detailed accounting of the planned use for every dollar requested. For example, you may need the funds for operations (marketing, payroll, rent, etc.), purchasing assets (equipment, real estate, etc.), or to pay off business debts.
• How do you plan to repay the loan? Use your financial statements and cash flow projections to convince the lender that you will be able to repay the loan through the expected long-term profitability of your business. Demonstrate how this small business loan will help you “get your business to the next level.”
• What will you do if you don’t get the loan? Make it clear that you have a deep belief in your business and business plan, and you will keep trying lender after lender until you succeed in obtaining the funds you need to get your business moving.
Starting and running a small business requires a great degree of fortitude. Exude confidence. Let lenders know that you have a well-thought-out plan and know what’s best for your business. If a lender turns down your request for a loan, ask why, learn from the answer, and then use this information as you move on to try other lenders.
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