Most Important Things to Consider in Applying Business Loans
Okay, so you are high on the clouds! You have a great business idea and you just want to get on with that. You have a business name, you have the intellectual force, management plan, you have everything. Well, almost everything. You don’t have the required funds. There is this major hurdle – raising funds. New business loans can channelize your business initiative in the right direction.
New business loans are a huge responsibility. A proper new business loans is fundamental to starting a business and ensuring its expansion. Raising money for new business will not be possible without proper information and preparation. The most common source of new business loans funding comes under banks and credit unions. There is no need to believe that new business loans are harder to procure.
Prepare written proposal especially if you are looking for new business loans. Approval of business loans considerably depend on how well a proposal is written by you. You would not find new business loans if you falter in your presentation. Every lender will be looking for repayment when he is making a decision about extending new business loans. A written proposal will contain general information and details about financial status.
Business name, name of proprietors, with their social security numbers will constitute the general information. Details about the new business loan, the amount required, its purpose and usage will be imperative. Also, mention the nature of new business you are trying to venture in. Provide some information about your education, experience, skills and achievements. Your personal financial statements and of partners will be required. Don’t forget to give details about the collateral you are offering.
New business loans proposal will be practically incomplete without business projections. Business projections will include details about how positive cash flow will be achieved. Give information in the profit and loss figures explaining income and expense. Provide concrete examples, easily identifiable from industry standards. Write in a way that can be described with industry standards and which is easily understandable.
New business loans can be either long term or short term depending on your financial demands. Short term loans will have a loan term up to one year. On the other hand, long term loans have loan term ranging from 1-7 years. This term can extend to 25 years in case you are applying for equipment and real estate new business loans. Entrepreneurs can get start up business loans ranging from $23,382-$38,9700. Some lenders may be willing to offer more as new business loans. However, you should be able to prove that you will be able to repay it.
An important consideration of new business loans lenders is credit ratings. Credit history and credit score is the single most significant criteria that helps the lender to decide whether to provide the borrower with the loan or not. Many people are practically unaware of their credit score or whether they have a credit score or not. Three major credit scoring agencies – Experian, Trans Union, Equifax – will enable you to find your credit score. Check your credit report carefully and see if there are any mistakes or changes. They can be easily corrected if you happen to inform the credit reporting agency. Credit score above 620 is considered good credit. Anything below will start having problems finding credit on their terms. Below 540 is considered bad credit. New business loans are available for bad credit borrowers. But, only few borrowers are willing to work with them and will come with the drawback of higher interest rates.
When starting new business, dedication and passion are not enough. You will find that finances are something without which your skills and efforts will not be suitably translated. Business loans can provide you with the finance that you want and get you the success that you deserve.