| Business loans |
| Written by Henry Johnson | |
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Tough times often lead to the birth of major corporations as folks are forced to rely on their own smarts and ingenuity rather than the paternalistic embrace of a corporation to secure a living for themselves and their families. Getting started can be tough, however, and that's where business loans can provide a powerful priming to the pump of ingenuity and innovation. There are many options for entrepreneurs looking a business loan. For small-time endeavors, friends and family members may be willing to front you the money. For more complex undertakings, banks, credit unions, and savings and loans are a possible source of funding. The government may even be able to help. The U.S. Small Business Administration and many state and local governments offer loan programs aimed at encouraging the growth of small businesses. For a good starting point to bone up on these loans and lenders, check out www.sba.gov/financing . More likely than not, however, you're going to have to turn to a bank for funding, however. Getting money from a bank to get your business off the ground is the most difficult part of starting a business -- more than 90 percent of small business loans are rejected by banks. By taking a few necessary steps to prepare to ask lenders for money, however, you can greatly increase your chances of getting approved by a bank. When considering whether to green-light a small business loan, banks and lenders look at your personal credit history, business plan, experience, education, and the viability of the business you are starting or expanding. The number one, most vital task in obtaining a bank-backed small business loan is preparing a business plan. Consider it your lending resume. The business plan must reassure the lender that giving you with a small business loan is a low-risk proposition with the potential for reward. Your business plan must answer basic questions such as: how much money you need, what you intend to do with the money, the timeframe for repayment, what you will do if you don't get the loan. The lender will want to ensure that you have a realistic business proposal, and that you have a good working knowledge of the products or services that you’re offering and the market in which you want to operate. The usual business plan includes an executive summary, a clear description of what the intent and goals of your business, estimates of income and expenditures, an analysis of the market you wish to enter and the competition you're likely to encounter, and plans for growth and possible exit. You should utilize the business plan to demonstrate the breadth and depth of your understanding of the industry and your particular knowledge and skill sets. You’ll also want to give the lender with some estimates of cash flow to show that there will be an uninterrupted flow of money to help repay the debt. Before applying for a business loan, check your credit. Get a copy of your credit report, take a look at your score and clean up any forgotten debts or delinquent payments before applying for a business loan . Lenders will also want to know what collateral you put up to support the loan. Any assets like property, equipment or something else of tangible value will give you a better chance of getting the loan because these things can be sold to repay the loan if you are unable to repay it yourself. Lastly, when applying for a business loan, be aware that they can carry loan-initiation fees due up front; make sure you ask about these and any other fees and include them when you are totaling up the cost of the loan. Consult various lenders to ensure you are getting a competitive interest rate, and talk to other business owners to see which lenders in your area offer good deals and have a solid reputation. By doing your due diligence beforehand, you can ensure that not only will you get a business loan, but that you'll get one on favorable terms. |
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