Obtaining small business loan approval is essential for companies, and there are a few things that can ensure a firm gets the financing they need. There are a variety of lenders who specialize in small business financing, and many firms choose to rely on the services that are offered by local banks. Funding can also be had through venture capitalists as well as government programs that are designed to support small businesses in their daily operations.
Banks are in business to make loans, and a small business should be sure to ask their local banker for the money they need. Chances are improved when a company goes to a bank that is already familiar with their industry and works with small businesses on a regular basis. Start-ups have their own concerns, and most lenders require strict forms of collateral to insure their capital.
Preparation is a key to obtaining small business loan approval, and there are several things that should be done in order to ensure success. Profit and loss statements should be procured for a three year period, and a potential borrower should be sure they have cash flow statements as well as financial statements for at least three years.
Information is a powerful tool, and lenders want to be assured their loan is relatively risk free. Borrowers should be ready to answer all types of questions that the lender may ask, and they should clearly know how much money they need. It is better to ask for all that is needed to ensure success than to run out of capital in the middle of operations.
The length of time that the funds will be needed is another essential question that the banker is bound to ask. They will also want to know what the money is needed for, and borrowers may need their funding to purchase new equipment or for daily operational expenses. Cash flow statements will be used to develop the time frame that is required for repayment, and the lender should be convinced of the profits the business is making.
Remain positive during the application process, and keep in mind that confident borrowers are more likely to get their funding. Brochures, advertisements and press releases are great things to give to the banker and are an aid to the overall image of a company.
Documents should be neat and well-organized. A professional spreadsheet will go much further than illegible hand written documents. A cover letter is another essential as well as a business plan that documents the targeted market, competition and funding requirements in detail.
The first loan may be the hardest to get, but it is imperative to not give up. Keep trying, remain confident, and go to a variety of lenders until the small business loan approval is had. Negative decisions from one firm can be used as a learning opportunity for the next one. Ask the banker why the loan is refused, and then this can be remedied before the next lender is approached. Risk should be readily discussed, and there are not profits without this. Downplaying the role of risk in a small business will lead to the lender assuming this issue has not been covered.
There is also the proposition of the risk of too much success. Lenders will often want to know how a small business will approach their success. Getting small business loan approval may be difficult in today’s economy, but lenders are in business to provide funding.