Small business, big dream / how to get a small business loan
Whether you are planning to expand the size of existing small businesses or start a new business, small business loans can provide you with financing support. Not all businesses have access to small business loans, so you should be very careful when applying. Make sure you are as accurate as possible in all respects and make your company as financially transparent as possible, which will increase your chances of getting a loan.
1. Establish a good financial reputation
Get your personal credit report and check its accuracy. You can even get credit reports from all major credit reporting companies in the country. Most financial institutions will check your credit report when accepting loan applications.
Gather the necessary financial statements. When determining whether you qualify for a small business loan, the lender needs to reasonably determine your liquidity. To do this you need to pay for some important financial documents.
Improve the financial statements of the past three years. These statements include, but are not limited to, balance sheets, income statements, and net asset reconciliations.
The financial statements of the most recent period are no more than 90 days away.
The debt plan, as well as a detailed record of accounts payable and accounts receivable (sorted by month, at least back to the first three months).
If you are making a loan for a new business, you will need to provide a balance sheet and a profit and loss statement.
Formulate future business plans. The time covered by your business plan should be no less than one year or until there is a positive cash flow, whichever is shorter. Enter the “12-month profit and loss plan” in the search engine to find the standard type of form you need to use.
Try to follow industry standards when developing a profit and loss plan. If you don’t follow industry standards or don’t know what these standards are, try to understand the assumptions used in the plan. In this case, the lender can better understand the method you use when reading your application.
2. Improve the application form
Ask the financial institution which specific documents you need to prepare. Also ask what other information is needed for your loan application. Different institutions have different requirements for small business loans. Below is a short introduction to some of the common basic files that need to be submitted.
If you are not ready yet, first write an executive summary. The implementation is equivalent to a cover letter to the description. It should include business background information, a brief description of the business operations, the amount of loan required, the scope of use of the loan, and how the plan will repay the loan.
Provide personal data for each shareholder and executive. Can you and your supervisor accurately convert the loan into profit? Your business must be able to support long enough to repay the loan, which the bank wants to know. Dong Gao’s information can help them understand this information.
Write a company profile. The company profile will give potential borrowers a deeper understanding of your company’s business operations and operating models. Although the company profile can cover a wide range of businesses, you should write the information that best attracts potential borrowers.
This information includes:
Basic information about the company – the type of industry, the geographical location of the company, and the products and services offered.
The company’s financial position – annual sales, projected growth rates, and competition that may or may not be present.
Company staff composition – total number of employees, number and size of customers, and supplier information.
Fill out the Small Business Association (SBA) Form 4. This is the most important form of a small business loan. In this table, you will describe what type of loan you will apply for, how you will use the loan in the future, and some other information.
Describe how you pay for repayment. If the loan is your most important step, seeing the return of the loan to potential borrowers is their most important step. The following documents allow potential lenders to determine that you are repaying loans and borrowing in the same priority.
Loan repayment statement. Briefly describe how you plan to repay the loan, especially the source and duration of the repayment. And other financial documents you give to potential lenders should be able to match the repayment schedule.
SBA’s 4a table. Unlike the loan repayment statement, this form records the items you are going to use as collateral (almost all borrowings require collateral). The repayment list in this form should include two forms, such as existing income, secured loans, or merchandise.
Fill out Form 413 of the SBA. This table is required to fill in the financial data of the following persons: owner, partner and over 20% of equity holders.
3. Submit an application and obtain loan eligibility
Bring all the required documents and information to a meeting with the small business loan consultant of the financial institution in charge of your company. At the meeting, confirm that the documents are in place. Although this is only a non-mandatory step, it is a good way for someone who has never applied for such a loan.
Submit all applications and documents correctly to the relevant person or address.
Waiting for news from financial institutions. You need to know what the potential borrower will look for from your application. The following five key areas will determine whether you can get a small business loan.
Have sufficient equity investment in the business. Owners with equity are often more inclined to repay their loans.
Adequate cash flow to support the company’s operations. Cash inflows should be greater than cash outflows so that loans can be paid on time.
Sufficient working capital. Working capital is the difference between current assets and current liabilities. Clearly, higher working capital is more likely to receive small business loans.
mortgage. If the loan cannot be repaid, what will you pay for?
Effective resource management. Resource management includes the day-to-day management of goods and services, as well as the timeliness of repayments and the frequency of borrowing.
If you do not get a loan, consider the loan guarantee program. If the bank rejects your application and you are in the US, ask if you can get a loan under the Small Business Administration’s loan guarantee program. In this program, SBA provides guarantees for the parts that financial institutions cannot afford. If the financial institution can do this, send it a loan application to the SBA, which will re-examine your application. If you qualify, SBA will contact the bank. You will get a loan through your local financial institution. If the lender rejects your application and you are not in the United States, ask the financial institution what other options are available.
If you are unable to obtain a small business loan under a bank loan or loan guarantee program, find the non-bank borrower selected by SBA. Many banks are now reluctant to lend to small businesses that are all over the street. What they need is not just financial incentives. If you want to increase your chances of getting a small business loan, work hard in other directions. For example, contact a non-bank loan. Non-bank loans are similar to banks, except that they usually serve businesses rather than individuals and do not have a savings account. These borrowers charge higher fees based on higher risk.
Recent Comments