Starting your own business is an exciting time. It may–understandably–bring some financial anxiety. Depending on the nature of your business you may not project to see returns for quite some time. Meanwhile, some small and medium-sized businesses choose loans. Going into debt before you’ve even begun can be a risky prospect. However, the investment can pay off many times over. Just learn as much as you can ahead of time, and set yourself up for success.
Make a Solid Plan
Preparation is your best friend when you visit a lender. Showing the lenders you have a solid plan in place improves your chances at getting a loan. Show, in detail, how you plan to make money and pay back the loan. Arrive at your meeting with all the necessary documents ready. Show the lender you treat this relationship seriously.
Consult a Mentor
Do you have a business mentor? If you do, arrange a meeting with them well in advance of your meeting with a lender. Talk with them to see if they’ve been in a similar situation and find out what they did. Your situation may not be the same, but it’s always a good idea to hear what others have been through with loans.
Find a Knowledgeable Lender
All lenders know finance. But certain lenders are knowledgeable in one field or another. If you’re starting a restaurant, you wouldn’t want to go to a lender who specializes in something unrelated. Finding a lender who specializes in your field lets you know they know what they’re talking about and they can tell if the plans you have in place for the future are feasible.
Once you secure the loan, don’t leave your lender in the dark. Use your solidly prepared plan you crafted for the meeting and stick to it. Depending on what you’re doing, you may need additional paperwork from the lenders. Letting them know you’ll need the paperwork drawn up ahead of time can keep things running smoothly.
Consider the Small Business Association Loan Program
The SBA is there to be a helping hand. After all, small businesses are a vital part of American culture. The SBA Loan Program doesn’t give businesses money directly. Instead, they lessen the risk to banks and guarantee part of the loan.
Consider a Small Business Credit Card
Bank of America notes that 65 percent of small businesses use a credit card. Keep your personal purchases and business purchases separate from each other. Consider applying for a small business credit card. Just remember that only making the minimum payments each month can negatively affect your credit score, which adversely affects your chances of getting a loan.
Take Advantage of Reward Programs
If you decide to use a small business credit card, take advantage of any perks associated with it. Does the card have discounts for business-associated purchases? Does it offer airline miles? Are you able to get cash back? The rewards are there for a reason. Use them to help with your business.
Don’t Let Loans Be Your Last Resort
Loans should never be considered your last resort. When people are in sticky situations, they tend to do things out of desperation. This could lead to you taking a loan that may be impossible to pay off. You may also not have all the right documentation ready promptly. If you start noticing signs of troubled cash flow, monitor the problem issue and start preparing any documentation. It will make life easier, and you’ll have a better outlook to tell lenders.
Taking out a loan doesn’t have to be a nightmare. View it as a calculated risk that benefits your business. Take these lessons to heart when you consider applying for a loan.
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