When you walk into a bank or a lending institution and apply for a business loan there is no guarantee that you will receive it. Although these institutions are in the business of loaning money in return for interest, they need to be assured that their investment will be returned to them for a profit.
Banks and lending institutions have set up certain criteria that help them to understand the business they are lending to and the reason they are requesting the money. The business applicant must therefore be prepared to fully inform the loan officer of the business’ operations and his reasons for seeking a loan.
One of the best assets that you can bring to a lender is a business plan. A well thought-out business plan should contain information concerning your products, clientele, and marketing strategies as well as future goals and profit projections.
The business plan allows the lender to get to know your business. The more complex your venture is, the more comprehensive your business plan should be. Thus a company that designs statistical software to project population growth would require more documentation then a sidewalk lemonade stand.
Since you may be involved in an obscure venture that, although profitable, is little understood beyond your customer base, you should be prepared to fully explain it to your loan officer.
The following is a list of information to prepare when trying to secure a loan:
- Be sure to include a precise breakdown of your products. Do you manufacture, resell, or liquidate your product line? If you are service provider, then explain clearly what service(s) you offer.
- The lender should be aware of your niche market and what distinguishes you from your competitors.
- You should also be prepared to give the lender a complete breakdown of your operations. For example, if you are running a lemonade stand then you need to explain how you get your lemons, how they are processed to make juice, how the juice is displayed and sold, and how the profits are dealt with after the juice is purchased.
- You should also let your lender know about your marketing and advertising techniques as well as the costs involved. This will give them a picture of the demographic you are serving and the effectiveness of your marketing systems.
- Finally, you should explain the purpose of the loan. That way the lender will see if you will use the money for a legitimate business purpose. You should also include a breakdown of the profits that you hope to achieve once you are able to secure the loan.
Securing a business loan requires a great deal of preparation on the part business applicant, and sometimes the task can be pretty daunting. Many small business owners have managed to avoid the bureaucratic nightmare of loan applications by taking advantage of business cash advances. Business cash advances are based solely on your future credit card transactions. Once the cash advance facility purchases these transactions, the money is yours with no interest, no obligation to repay, and no restrictions on use.
