How A Small Business Can Secure A Business Loan
Money proves to be the lifeline for any business; therefore, whether your business is a start-up or you are running the one that already exists, securing a loan is one major factor, particularly for the small businesses. It is considered a daunting task by many burgeoning entrepreneurs and they don’t have any idea where they should start from.
What is the banks’ criterion to assess small business for business loans?
Different lending institutions or banks can have their own different standards but, generally, banks need the following for your application to be considered for business loans for your small business:
- There should be a solid business purpose for securing a loan. For the SBA-guaranteed loans, business should be eligible depending on size, use of the loan proceeds as well as business’ nature.
- You as well as your partner(s) have good character, carry enough experience, and have good business and/or personal credit history.
- You have the ability of paying the loan back and strong or, at least, reasonable collateral is really important. It is expected by SBA that loans should have full security, however, a request is not declined only because of insufficient collateral. Also, the owners should have their personal equity invested in business.
What information is needed?
Different information may be required by different lenders but, generally, you’ll need to have:
- Business and personal credit history
- Business and personal financial statements of existing as well as start-up businesses along with projections of financial statements
- Detailed, solid business plan that also includes personal information like education, bios, etc.
- Projections of cash flow for one year at least
- Personal guarantee from the principal business owners