Getting a loan for a new business can be challenging. To bolster your chances of getting a startup loan, consider these five tips.
1. Highlight Prior Industry and Management Experience
From the lender’s perspective, your past experience can be predictive of your potential for success as a business owner.
For a bank loan or Small Business Administration (SBA) loan, the lender will typically want to see three to five years of industry experience. For example, if you want to open a hair salon, it really helps to have a few years under your belt as a stylist at a leading salon.
General business management experience can be helpful. Skills such as hiring employees, accounting and marketing are transferable to your new business.
2. Prepare a Solid Business Plan
A solid, well-thought-out business plan is usually critical to getting a startup loan.
Among other details, a business plan can include:
- Ownership and Management Information: Detail the experience and qualifications you have, and (if applicable), those on your management team.
- Company Overview: Describe the service or product your startup will provide, and explain why your product or service is valuable.
- Market Analysis: Discuss the overall market for your product or service and how you stand out from competitors.
- Marketing Plans: Present how will you get and retain customers for your new business.
- Financial Projections: Provide realistic, well-supported analysis of how your business will perform financially in the next 3-5 years.
3. Save Up Personal Capital
Save up as much money as you can when you’re planning to launch a startup.
4. Boost Your Personal Credit Score
Since a startup business doesn’t have a track record of its own, your credit history as an individual can have a big impact on your ability to qualify for startup financing as well as the interest rate you’d pay on that financing. Some steps you can take to increase your personal credit score are below:
- Pay all your bills on time.
- Lower your outstanding loan and credit card debt.
- Fix errors on your credit report.
5. Start Building Your Business Credit Score
As soon as you open up your business, you can start building up a business credit score, which is different than your personal credit rating. Some steps you can take to establish business credit are listed below.
- Obtain necessary licenses or permits to start the business.
- Get a D-U-N-S number from Dun & Bradstreet to establish a business credit file.
- Open a separate business checking account.
- Get a business credit card.
- Identify suppliers that report to the business credit bureaus.
Getting startup financing can be a challenge. The tips above can help prepare you to make your best case possible.