Small business loans can be challenging to get. Getting funding for small business loans can sometimes feel like trying to fit a camel through the eye of a needle. But with the right preparation and the correct documents, you can get small business loan financing.
Tips for Getting Small Business Loans
Getting approval for small business loans is not as difficult as it seems. It comes down to getting the right documentation to the right lenders. Here are the top ten tips for getting loans for small business.
Start Building Relationships
If you think that a small business loan might be in the future for you, start building relationships with lenders today! One of the best ways to get financing to your small business is to take your proposal to a lender you already have a relationship with. As they know you and your fiscal responsibility, potential lenders might be more willing to give you the financing you need. Financing a small business is a big risk for lenders. If they have a relationship with you and know your character, they are more likely to fund your small business.
Along these lines, talk to your personal banker first. There is a good chance that if you already have a good working relationship with them, they might be willing to finance your small business loan. Your personal banker is a good place to start!
Early Repayment Penalties
Check out your contract carefully. Some lenders build in a penalty to the loan contract if you choose to pay off the loan early. This can be as much as 2%-5%. They do this to ensure that they get their money from the interest on the loan. If you pay the loan off early, they will lose some of the interest in the contract. If your goal is to pay the loan off early, make sure your contract is without penalty for early repayment.
Avoid Restaurant Plans
Getting funding for a restaurant is nearly impossible. Restaurants have a fast turn around, especially as today’s American eater enjoys frequenting large restaurant chains. Unless you are particularly experienced in the restaurant market, it can be very difficult to secure small business loans financing for a restaurant endeavor.
Don’t Look for the Cheapest Loan
When you are looking for small business administration loans, do not always look for the cheapest possible option. While you do want an affordable loan, it can be more helpful to have a loan that has terms you can agree too. Also, you want a lender who is looking out for your best interests. If that means that you have to pay a little more in interest, it is all right.
Have a Quality Business Plan
Your business plan is the most important document you need to have when pursuing a small business loan. Your business plan should include a summary of the whole plan, followed by an overview of the industry where your business is going to be.
Next, include in your business plan an analysis of the current market for your business. Make sure you include information about the geographic location of your business, as well as your target market. Show how your business is going to meet an actual need. Analyze your competition as well, and show how you will stand out against them.
Next, your marketing plan should be included, which will show your strategy for sales, how much you are going to charge, how you are going to advertise, and how your product is going to benefit the community. Show the management structure of your business as well. Show the structure of your management team. Have an operating plan that will show where your facilities are and who you are going to employ. Finally, show in your financial plan how you are going to pay back your loan.