At some point, many small business owners consider applying for a bank loan. Before you approach a bank for a loan, it’s important to prepare for the process. The list below is designed to help you get ready to apply for a loan.
Choose the Right Institution
Determining the right institution is important. Large lending institutions often have strict policies in place when it comes to issuing small business loans. These policies are designed to minimize risk, so startups may also want to consider a small, local bank or a credit union. Entrepreneurs may also consider a bank where they’ve had an account for a period of time, especially if they’ve had personal loans through that institution.
The Small Business Administration (SBA) has guaranteed loan programs designed to help businesses. To qualify, a business must meet the SBA’s guidelines, which can be narrow.
Have a Strong Business Plan
Your lender will almost always want to know as much as possible about your business before agreeing to a loan. A strong business plan is a professional way to provide information on your business, and should include biographical information on everyone involved in running the organization, as well as detailed information about your goals, marketing plan and operational setup.
The financial aspects of your plan will likely be of acute interest to a lender. Prepare your cash flow predictions for at least the upcoming year, and gather your personal and business’ credit history and bank statements.
Prepare Your Financial Statements
Using a bookkeeping system like QuickBooks, prepare your financial statements.
Seek Legal Expertise
A legal professional can help prepare or confirm that you have all of the proper paperwork filed with your state, and can check that other items, such as trademarking your business name or patenting your products, are completed or underway.
Taking the time to prepare when considering a loan is a worthwhile investment that can help you save time if you decide that the best next step for your business is a bank loan.