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First Time Business Loan | 9 Things You Need to Know Before Applying

by Robert Wagner on February 26, 2010

So you have decided to start a business and get a loan for the first time, congratulations! All you need to do now is find some cash to get your new business off the ground. If this is your first time business loan adventure, go through this 10 step guide. Learn what you need to know before you apply for funding. You will also want to consider working with the Small Business Administration. The SBA has programs like the Microloan that many first time business loan applicants could qualify for.

1- Start with a business loan application?

Although business loan applications vary from bank to bank, they all have some basic information in common. Here are some universal questions:

  • Why are you applying for capital?
  • Who will be managing the business?
  • What will you use the funds for?
  • What assets do you need to purchase?
  • Do you have a list of suppliers?
  • What is your personal background?

Lenders will want to know your previous address and whether you have a criminal record.

2- Resume

Lenders will want to know a little about you. What is your background, do you have any special training or degrees, and what experience do you have in the type of business you plan to open. You may be asked to put this in a separate document or as an attachment to an application.

3- Business Plan

Yes, you will need a business plan. Keep in mind that the executive summary is what lenders will view first to decide if they want to continue reading your business plan. You may want to have this do by a profession.

4- Personal credit

Be prepared to have your personal credit examined. It is always a good idea to know what is on your report so you can answer any questions that may come up.

5- Tax returns and bank statements

Most lenders will want to see 12 months worth of bank statements and you tax returns.

6- Financial statements

The lender will want to see business projection in a professional format. Financial statements will be the only way for the bank to judge how you feel the grow over time. You should have, cash flow, income, and balance statements and you should know how to use them. Don’t forget to add in seasonal adjustments.

7- Collateral

If you plan on using any collateral, have a general idea of how much it will be appraised for and list it in a separate document.

8- Insurance

Just like a car loan, if you use any collateral to secure the loan, you will need to provide insurance for the asset. Call you insurance provider to make sure that the collateral that you plan to use is insurable.

9- Legal documentation

Have a list of the legal documentation that you will need to start the business. Many banks will want to make sure that you can get the necessary permits and license.

Many aspiring small business owners have no idea of where to start, and what is expected of them, in order to get funding.You can start with this list and ask your local bank for help when you feel you need it. The SBA and SCORE can also help you with the first time business loan process.


{ 5 comments }

Susan March 9, 2010 at 7:44 am

Getting a small business loan is becoming increasingly harder. I never heard of bringing your resume before. It’s something to try when I decide to apply for a small business loan.
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Robert Wagner March 9, 2010 at 11:08 am

Hi Susan,
It is always good idea to show lenders you have some experience.

Rob

Michelle June 23, 2010 at 8:18 pm

The business plan indeed is something really important when you are going to get a loan. Lenders need to know if they are giving money out to people who will be able to pay back. The resume is something I never thought would be needed, but indeed, getting a loan today is much harder than it was 5 years back. Another important thing is a good credit report.
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Robert Wagner June 24, 2010 at 2:19 pm

Thank Michelle for your comments, a good credit report can’t hurt.

Rob

Kay July 22, 2010 at 1:38 pm

It is very hard to get a loan right now. Too many small business loans require you have reveneus of 250,000 or more in the previous year if you are not a start up. I tried to aply for a microloan and they didn’t even ask for the business plan and denied me fromt he prequalify stage. how can we help the economy if we can’t get the smallest bit of help. Your credit has to be perfect and in this economy not many people have that so what options are there?

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