Significant Tips To Help You Secure a Startup Business Loan From The Bank
Most startup businesses have trouble obtaining a loan from lenders. It is especially harder during economic slowdowns. Here is a look at a few tips to help you increase your chances of securing a loan from the bank:
Prepare a Business Plan
The bank needs to see that you are well prepared for your new business. You need to prepare a thorough business plan detailing your strategies and financial projections for the new venture. Demonstrate exactly how the loan proceeds will be allocated to the business. Include case study research of similar businesses.
Put Your Finances In Order
The bank checks your personal financial history while evaluating your application. Ensure that you have a good credit score. Additionally, make sure you save up at least 10 percent of the amount you intend to borrow. This way, the bank will see that you are willing to contribute some of your own money towards the new business. Have your tax returns records ready to show that you have a good income history.
List Your Assets
Like all lenders, banks are risk-conscious, and business startups are in the high-risk category. They can only rely on your existing assets as collateral in case of default. To stand a high chance of securing the loan, list all your assets in the application. These include your home, shares, bonds and vehicles among others. If your assets are of high value, then you stand a chance to borrow more. However, be cautious not to overextend yourself because you stand to lose each asset you use as security in case of default.
Prepare a Resume for You and Key Principals
While evaluating your loan, the bank will do a background check on your character and experiences. Be sure to list respected community members and colleagues as your references.
Register Your Business With The Government
The bank needs to see that you are an established business. They will want to see that you have a registration certificate and fictitious business name. If you are not sure of how to register your business, you can visit your state’s registration website or enlist services of a professional.
It is important to note that default of bank loans leads to hefty fines and penalties. You also risk losing the assets you listed as collateral. You, therefore need to carry out extensive research on the business field you intend to venture in.This way, you will be entirely prepared for the new task thus eliminating chances of making losses. When your business makes good returns, it means you will pay back the loan with ease.