Qualifying for a business loan is not as easy as it was even one year ago. This is because most lending institutions have increased the requirements for businesses requesting a loan. The recent slowdown in our economy has forced banks to re-examine their lending practices as many businesses are experiencing lower profits. So when you are looking for a loan for your business it is important that you have everything in order so you will have the best chance to be approved.
One of the first things that you need to look at before going to a lending institution is whether or not you have a good business plan together. Having a business plan drawn up for your company is a great way to show the bank that you have carefully considered your request. This will show the bank where your business is currently and where you hope it will go once you have been approved for a loan. There are many professional writers that work as freelancers that have the expertise in this area that you can hire if you are uncertain about your ability to convey your thoughts on paper.
The next thing to do before you go to a lender is to look at your company's financials. Clear as many debts as you possibly can. For example, if you use a credit card start paying it off monthly or if you have a vehicle loan with just a few payments left on it you might want to consider paying it off. This will help your income to debt ratio and make your business a more attractive prospect.
Once you have done that, you should look at all the officer's credit reports. Every officer of the company will have a credit history run on them because they will be personally guaranteeing the loan. So make sure that the person income to debt ratio is good and clean up any bad marks against your credit.
When you have all of that together you are now ready to go to the lending institution. With the situation the way it is currently it would be wise to start with the bank you already have a relationship with. This is especially true if you have a community or local bank. They make their decisions based on the local area unlike the larger national banks. If your company is turned down don't take it personally but consider your other options.
There are other places to gain access to a loan. You need to keep your eyes open, when the private market tightens the amount of money they are willing to lend oftentimes you can more easily qualify for an SBA loan. So if your bank says no don't give up to easily especially if all of your financials are strong. So when you are looking for a business loan make sure that you have your company looking the best that it can financially and present the lenders with a solid business plan.
Craig Thornburrow is an acknowledged expert in his field. You can get more free advice on a small business loan and home business loan at http://www.businessloansadvice.com
Article Source: http://EzineArticles.com/?expert=Craig_Thornburrow
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2 comments:
Interesting post. I'm planning on running a business soon, so this will be very helpful. I'll have to keep it in mind, especially during these tough times. I can use all the help I can find! Lately I've been thinking about buying a business instead of starting one from scratch. I'm a little on the fence though, and I'm trying to weigh the pros and cons. Do you have any advice for this possible decision? Thanks.
@Isa - Yeah, right now is a tough time to be a small business... Or any business in general. But hey, if you can survive this economy, then you should be able to survive anything. If you are thinking about buying a business, then don't forget to do your due diligence. Find out where the company you are planning to purchase failed. And don't forget to find out what is even available in your area. I know there are sites like BizTrader.com, which is like this online global marketplace where you can buy or sell a business. Or if you want, just invest in a business or find a lender. I also suggest looking into your local small business group. They should also know what's going on in your area.
Good luck!
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