If you are a first-time entrepreneur and you want to start your own business, you are almost undoubtedly going to need a bank loan. Here are some tips on getting a bank loan to forget all your doubts.
You must realize that because you don’t have a business ownership track record securing a bank loan will be an uphill battle. That doesn’t mean you shouldn’t try but don’t expect the process to be easy. It won’t be. Any bank will tell you that a small business loan has risk factors and that costs of servicing these smaller accounts are primarily responsible for their disinterest in offering a bank loan to an aspiring entrepreneur. Your first-time business bank loan can happen, however, and here are some ideas on how to increase your chances of getting that small business bank loan.
The first thing to remember is to think positive and assume you are entering that bank from a position of strength. Keep in mind that you are the customer, not a beggar. Banks sell loans, you buy. For the most part, those banks want and need your loan business and the loan officers are tasked with getting your business.
While it certainly is always a good idea to start with the bank that is familiar with you as a person – the one with which you’ve done business regularly – it is also important that you seek a bank that has underwritten loans for others in your industry and stays familiar with your industry. Look for banks that actively finance small businesses.
There are also banks whose specialty is government programs – participation by the government in funding or guaranteeing loans. Information on the latter would be readily available at your local Business development institutions
Keep in mind, however, that no matter how dedicated to small business financing, the bank is going to ask for some hefty collateral for your start-up business. Be prepared to prove to that bank loan officer that lending you and your new company money is not a high-risk proposition. Complete your loan application prior to arrival if you can, bring copies of three years of financial statements such as cash flow, testimonials from satisfied and returning customers, your business plan and a cover letter that spells out why you need the money and how your business is now thriving and will only do better with that bank loan funding.
If you are fully prepared to ask for that bank loan, no question should surprise you. While you should have the details in your business plan already, be prepared to talk about how much money your firm will need and for how long, and what the bank loan funding will be used for. You’ll need to talk about whether you are going to buy new equipment, supplies, and assets, pay off some old bills, or spend it on operating expenses. You’ll also need to show a well-thought-out and achievable repayment plan, with a payment schedule.