Obtaining a business loan isn’t quite as simple as it used to be. Economic prosperity and disparity is now much more dependent on the vast amount of money that gets moved and spent on businesses via loans. Banks and investors are more conscientious about who they give their money to, which means having all your ducks in a row is essential to getting approved for your much needed cash injection. Here are a few things to remember before you even step a foot inside the office of an investor or a bank.
Paperwork
No lender or investor will want to loan money with a business who cannot keep organized with their records. Tax forms, profits and losses records, balancing sheets, bank statements and even an up-to-date business plan. These are fundamental not only to keep your business functioning, but are also fundamental as evidence of the success of your business. Otherwise, a loaning party would just have to take your word for it, and there is not a single loaning party out there who would do so without documentation.
Reasons for Capital
One of the most obvious yet overlooked aspects of getting a business loan is being able to thoroughly explain exactly why it is that you need money. It may seem obvious to you, but investors and lenders have no emotional or personal stake other than a healthy return, so putting it in terms of money and business are critical. You should be able to explain what you would be using the money for, how it gets incorporated into your business plan and what kind of return you would be getting back to your investor when the money makes the business grow.
Do the Research
Not all lenders are the same. There are large banks, small banks, credit unions and all different types of investors. These will all have differing options and requirements for getting a business loan. Some banks’ underwriting guidelines are much more stringent than others, and they will require more documentation for you to even be considered. Private investors will also want to see the practicality of your business and what you hope to achieve with it. They may also want equity at a valuation that might be much less than what you valued your business at. They may want royalties for a set amount of time or even permanently.
Keep these tidbits mind when deciding where to go. Know what you’re getting yourself into, keep detailed records for your business and be able to explain at length what you would use the money for.
