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How to Get A Small Business Loan
As a small business owner, your may find that the most difficult task you have is finding the money to operate your business. Yet by taking the necessary steps to prepare for a small business loan you can minimize the difficulty. Learning what you need to know can often clinch the loan deal.
Banks and other lending institutions most often cite risk factors as their main reason for turning down small business loan requests from startup businesses. Yet you should not give up you can still get a loan for your business by proper preparation.
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First you should understand what your options really are.You should avoid the common error of thinking you can start with grants from the government and community agencies. This option is even more unlikely than getting the money from your own savings, family, friends, or a bank.
You should also keep in mind that the main requirements of obtaining a small business loan will be your personal credit history, business plan, experience, education, and feasibility of the business you are planning to start or expand.
Financial experts agree that the most important task to obtain a small business loan is preparing a well-written business plan. Your business plan needs to show the lender that providing you with a small business loan is a low-risk proposition. Your business plan should also answer the questions a lending institution would ask. These questions usually will be:
- How much money do you need? If you are starting a business, this dollar figure should be included at least in the start-up capital estimate. You should understand that accuracy is important, so request enough money to invest wisely.
- What are you going to do with the money? You will have to provide, in detail, the designated use of every dollar that you have requested. A small business loan is most often needed for: operations (new employees, marketing, etc.), assets (equipment, real estate, etc.), or to pay off business debts. Be clear with what you are planning to do with the money so that the lender has a chance to invest his confidence in your abilities.
- When will you repay the small business loan?You should be able to explain in detail how this small business loan will serve as a stepping-stone for your business. You will also need to convince the lender (with your financial statements and cash flow projections) that you are able to repay the loan through the expected long-term profitability of your business. Even if everything else in your business plan is stellar if you cannot convince the lender you are good for the repayment you will probably not get the loan.
- What will you do if you do not get the loan? You should let lenders know that rejection will not discourage you from starting or growing your business. You will want to portray a confident and determined personality and let them know that you will try lender after lender until you receive the money you need to get your business moving.
It is important to keep in mind that as a small business owner, you will need a certain degree of fortitude. You should be confident and proud of your venture. Do not be hesitant to let lenders know you are in control and know what's best for you and your business. The bottom line is that lending institutions need to make loans. However if you do not get one, don't be discouraged. You should ask the lender why you did not get the small business loan. Whatever is said learn from the answer, move on, and try other lenders.
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