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.
Lenders will want to know a little about you. What is your background, do you have any particular 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 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 your 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.
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.
Just like a car loan, if you use any collateral to secure the loan, you will need to provide coverage 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, 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 assist you with the first time business loan process.