How to Apply for a Small Business Loan

Small businesses rely on business loans to keep operating or take to start. They apply to bank or other financial institutions for commercial loans. Bank and other institutions are careful in financing new businesses, they prefer to give loans to already working business or to those whom bank can trust.

small business loan

Following steps need to be followed when applying for loans.

1. Reason and Amount of loan

it is important for the business owner to be sure of the purpose and amount of the loan. Already running businesses are perfectly aware of these requirement and reasons of loan, but the businesses that have not started yet and are working on the project of establishing the business cannot be certain. They have to completely study their needs and feasibility to access how mush loan they should request and for what purposes.

2. Visit your local score and SBDC offices

For start up businesses a good option to consult for advice is SCORE, it is a non profit volunteer group of retired businesses who provide advice for financing any business. Another possible source of advice is SBDC, a Small Business Development Centre. SBDC works under Small Business Administration(SBA) and helps small business owners to apply for loans and any other assistance.

3. Review Credit history and credit score

For new businesses to three year old businesses the business owners have to prepare a well-ordered personal credit history and business credit history. Credit reporting agencies issue credit reports on request for the owners. Owners should assess these reports in order to be sure they are free of error, if there are any errors they must notify in detail to the agency and get it rectified. Credit score is important to be checked, if it is around 700 it is considered to be good and becomes helpful to improve owners chances for getting loan.

4. Review your borrowing options

Owners should evaluate the options of banks and financial institutions available to make sure that they get the loan. Large national banks may be skeptic to give loans for new businesses so its better to apply at regional banks and smaller financial institutions.

5. Prepare Business Plan

Business plan

Business plans is a must to submit. It includes owners` financial statements, a statement of collateral or disclosure of type and value of assets used to get the loan, owners also explain the market they would target and also their own experience. Business plan acts as a proof of credibility of the loan seeker .

6. Presentation and Appointment

Owners need to make appointment with the loan officers but they should reach the offer well-prepared with the presentation of their plans and financial credibility. Executive summary is a must as most officers assist the project through it.

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