By Stephanie Lo
As any small-business owner can attest, one of the greatest challenges for an entrepreneur or small-business owner is to secure necessary start-up funding. Likewise, small businesses regularly face economic ups and downs as they establish themselves and whenever the economy takes a turn. Small-business loans exist specifically to assist such companies in starting and maintaining lasting economic success. While small-business owners may initially doubt whether their undertakings qualify for loans, numerous organizations can offer advice on seeking out loans as well as direct assistance toward qualifying for them. For example, the SBA program, a government-supported initiative, can help small businesses to improve their chances in securing loans from banks and other major lenders. In effect, the SBA guarantees banks that it will repay any loans that the small-business owners are unable to pay back. In order to make the most of such programs, your first step is to get informed.
As most authorities will advise, a primary factor in securing a small business loan is sufficient research and preparation. To begin, take plenty of time to assess the needs of your small business as accurately as possible. Pull out a calculator and crunch numbers to arrive at the most reasonable sum you hope to borrow. Once you have a clear map of your own aspirations and intentions, devote just as much time to researching the available loan programs and lenders that you may qualify for. If you know the expectations and tendencies of potential lending institutions, you may have a far better chance of having your application approved. From there, you can assess the different types of lenders who best match your own needs. Authorized SBA lenders, including some banks, are often the best fit for some newly created small businesses. On the other hand, more established businesses may try applying for more standard bank loans.
Once you have done sufficient background research on various institutions, it's time to consider how you will present your business to potential lenders. You can use the various checklists available online to ensure you have gathered all your pertinent documentation. The U.S. Small Business Administration is among one of the more authoritative online resources for accessing reliable checklists and tips. Your business plan is among the most important documents you will include within your loan application. Draft it carefully to demonstrate your business's viability and your own foresight and legitimacy as a businessperson. Not only should you polish the document itself, you should review it carefully until you can speak about it authoritatively and clearly in your loan application interview. Finally, make sure that your business plan and overall preparation is formulated on thorough research. For example, you should understand all of your business's potential tax obligations before drafting your business plan and determining the figure you seek to borrow.
Beyond the basics, anyone looking for a small business loan should also think a bit creatively. Your calculator can be your best friend during the number-crunching phase of your application planning. At some point, however, you should also give some time to brainstorming. You may want to consider unusual lending sources that apply to your particular situation. For example, some nonprofit small business initiatives target specific demographic groups or certain types of businesses and offer advice on where you can best secure funding. Some small businesses find that unusual alternatives, such as crowdfunding or micro loans, offer better chances of funding than banks and more traditional lending institutions. Peer-to-peer lending (or "P2P") is another avenue popularized by the Internet; under this model, individuals support small businesses, often with each person contributing a relatively small amount.
Finally, you may want to make sure that you remain on good terms with your lenders into the future. Not only is it good business sense but you may increase your chances of receiving future funding. For example, many small businesses regularly have to apply to borrow funds, such as during the holiday season, when it may be necessary to add on extra staff to make the most of the shopping spike.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of OneMain. The information in this article is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial, legal or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else. The author was compensated by OneMain for this post.
*OneMain Financial does not make business loans at this time.
OneMain Financial is an Equal Housing Lender.
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