How to Apply for a Business Loan and Succeed

Just about every small business owner will need an injection of cash into their business at some stage or other. It might be tempting to consider taking up an instant cash loan or one of the many fast loan options that are available in the lending marketplace. But the more prudent borrower will do some homework first by investigating which lenders offer the best features and the cheapest rates.

But, even when you are armed with all the facts, applying for a business loan can be tedious, time-consuming and often confusing. No one knows your business like you do and it can be difficult to explain your circumstances to a banker in terms they understand. But the bottom line is you will have to learn to communicate with a potential lender in language that makes simple business sense and be convincing enough to make them agree with your proposal.

Let’s take a look at the important things that every lender looks for when granting a loan to a small business.

* Track record. One of the strongest elements in considering whether you will qualify for a small business loan is to have a demonstrated successful track record. In most cases you will need to have been in business for a minimum of 2 years and have trading figures and analyses ready which can demonstrate a profitable trading history hopefully showing steady or, better still, increasing sales trends.
* Business plan. Even if you have a good trading history, when arguing for a new fund injection into your business it needs to be backed up with a well developed and detailed business plan. Your accountant will be in the best position to help you in this regard and it cannot be stressed enough that most lenders will seek detailed accounting analyses of any proposal which makes it doubly important to have your accountant prepare an analysis for you. The business plan should incorporate such things as:
o The reason for the request for funding.
o How the money will be spent.
o Analysis of impact on sales and bottom line.
o An overall comment as to how the business will develop over the coming years.
o Marketing strategies that will be implemented to increase sales.
o Detailed analysis of cash flow to be used to cover the loan repayments.
o Exit strategies.
* Collateral. Any substantial injection of funds by way of a business loan will need to be offset with a security which the bank will find suitable. Normally this takes the form of real estate which means that the bank will take a mortgage over either your home or a commercial property that is owned by your business. It is unlikely that any lender will be prepared to advance funds if adequate security is not provided.

Although these tips are not the end of the story, they will this point you in the right direction before you decide to visit your bank manager. Don’t be tempted to take the first offer, as many fast loan options can be expensive and inflexible.