There are many things a small-business owner needs to start a new company: a vision, a plan and – of course – a bit of cash.
From employee salaries to rent for your store’s space, there are many upfront fees you’ll be responsible for covering before your business gets off the ground. While some entrepreneurs have a financial cushion from which they can draw, the majority need to seek alternate routes for funding their ventures.
If you’re considering a small business loan, there are a few things to remember before approaching a potential investor. Review these five tidbits of lending advice to ensure the process goes as smoothly as possible.
1. Don’t go in blind
"Do your research" should go without saying, but you’d be surprised how many individuals walk straight into a bank or financial institution without any idea of how much money they need, what type of loan they prefer and how they can start paying it back down the road. You’ll need to chart out as much as you can before speaking with a financial institution. If you don’t know the exact type of loan that would be best for your business, that’s OK – professionals at these organizations are there to help you compile your information and determine which type of loan is best for you. However, you do need to come prepared with projected financials, including how many raw materials you need to purchase, how many people you need to hire, how much your rent will be, how much utilities will cost and how much overhead costs you’ll need to cover.
2. Know your credit score
As you’re researching loan applications, you’ll quickly find that not all small businesses get the funding they request. Filing a loan application can be a long process, so you need to know what you’re going into before getting started. Knowing your credit score beforehand gives you a better glimpse at your odds of getting your requested amount. If your score is lower than you’d like, knowing it before you sit down with a financial professional allows you the time to prepare for inquiries regarding your credit history.
3. Prep for the interview
Aside from compiling your information and coming prepared with your projected financials, you’ll need to get ready to answer questions regarding your work and credit history. A loan application is just that – an application, not a guarantee. Much like a job interview, you’ll have to sit down with a professional to discuss whether you’ll be chosen to receive funds. You’ll want to prep for this like you would any other interview, coming dressed in professional attire with a well-developed portfolio of your financials.
4. Speak to a professional
Starting to feel overwhelmed? Don’t! Thousands of small-business owners apply for these types of loans each year – many of whom get partial or full funding from lenders. If you don’t know where to begin – or you’re not sure how to even go about putting together an application – speak to a financial professional. He or she can help you compile your information and choose the best option for lending before you start filling out loan applications.