10 Tips For Securing A Business Loan
by Arina Smith Loans & Credit 27 April 2020
“Money cannot buy you everything,” or can it? Well, in terms of business, money is all you need. You really need to be big on cash to get your business up and running. But the question is, how do you get that much money? The answer is simple; you need to be born in a multi-million dollar family, somebody like Richie Rich, so you can just roll in a pool of cash every day and spend it around over anything you want. Convincing enough?
Okay, back to reality. If you want the greens, you need to pay a visit to your bank. Banks can offer you loans that you can use as an initial investment for your start-up business. It seems like an easy task, right? If you thought that, then you got another thing coming. Here’s the bubble burster, you need to convince the bank to lend you the money, and we kid you not that is the toughest part of them all.
For all the overly-optimistic fresh entrepreneurs out there, get one thing straight, banks do not fund your business plans, it’s not part of their policy. Do not lose your morals; we never said that it was impossible. There are various ways to improve your odds of getting a loan. Lucky for you, we have listed down some tips and tricks for you to bang the bank in a jiffy. Here are ten ways for you to be prepared.
Here are Ten Tips For Securing A Business Loan:
1. Solid business plan
This is one of the make or break situations. A business plan is one of the important factors when getting a loan for your business. Your business plan allows the lender and you to predict the future potential of your business, whether it would be a success, or would you end up in jeopardy? Before the lender lends you money, he/she needs to have a realistic view and sheer vision about your plans and how do you intend to survive the competition in the marketplace.
To convince them, you need to have a winning business plan that hits the bullseye. Nothing too big and fancy, a lean business plan with a summary of your company, market, product, team, and finances should do the trick.
2. Collateral security
The last thing you need is for your lender to get the idea of you wanting to have an unsecured business loan. Not all lenders are up to the idea of an unsecured business loan, and that’s a whole different story.
As much as we hate to say it, you need to agree to the fact that to convince your lender; you need to have a definite asset to back you up. That’s the easiest way of scoring the deal, risky but easy. Tangible property like appliances, land, or even livestock can help. Banks take this very seriously and carefully check if the asset is good enough to cover up the damage.
Having collateral security will allow the lender to trust your business plans, and the risk of the bank losing the money reduces. You even might end up paying less interest on the loan.
3. To get money, you need to have money
Just when you thought the collateral security was enough, here’s another tick-off, you need to prove that you can repay the bank. No lender would risk lending you the money without looking at your financial information; it’s an assurance that you’ll be able to pay the loan in time.
Do not cut corners with this; you need to set everything out there. All the information that you have, past and current loans, bank account information, credit card accounts, investment account, bank statements, and tax returns, you need to show that you are fiscally stable and financially responsible.
Look here for the various business loans that GetMoney.com offers to help finance your business.
4. Find a good lender
The last thing you would want is a bad loan deal. You need to keep your eyes wide open when it comes to lenders because many of them do lend you the money but with the hidden charges and fines that you find out about later. No one would want that.
It’s best to keep your options open; there is no hard and fast rule that you have to get a loan from the bank you have your accounts in. Go through the credibility of the lender, get reviews from customers as well as public records of their dealings regarding business loans. Opt for the one which gives you the best deal in terms of flexible prices and low-interest rates.
5. Registered business
To boost the credibility of your business, get yourself registered before getting the loan. Having your business registered would let the lender trust you and your business.
Some lenders would want documentation that proves you to be the business owner, so a registered business would give you an edge.
6. Get a partner in crime
To speed the process, you might want to consider having a business partner. Getting a partner to co-own your business and co-sign the loan application would make the chances of you getting a loan even higher.
The more partners involved, the better since it means more security.
7. Good credit score
To impress the lender, you have to have an applaudable credit score. An easy peasy formula for getting loans is a protected credit score.
It does not matter if your self-employed or have a white-collar job in a reputable company. What matters more to them is how good are you at paying debts. If you are clean, then you have nothing to worry about.
8. Brush up your skills
Everyone knows that the best negotiator always has the upper hand and gets the business deal. Similar is the case with loans. Just because you are self-employed or have little to no experience with negotiation, does not mean that you can not bag a good deal. Play smart and show the lender that you have bright business plans.
Good negotiation can get you a reasonable interest rate and a relatively flexible payment plan. It’s all about you choosing the right words to say.
9. A good Guarantor
If you do not have all the financial documentation or you do not have anything to put up for collateral security because of being self-employed, you can narrow down that gap effortlessly. Find a trustable guarantor for that loan you want. Who is a guarantor now?
A guarantor could be your next best friend who could back you up and give the lender the guarantee to pay back the loan. Not just that, but he/she would also have to pledge that in the time of need, he/she would be willing to help out financially, giving the lender another reason to find you trustworthy.
10. Credit union
A credit union is an organization of people having one common goal, lending loans to members, and pooling money. These unions are well-known for their low-interest rates, mainly because them being non-profit organizations.
For a credit union, you need to join them, save money, and own some shares in it. You will be offered loans depending upon the amount you saved, and you could end up getting a loan thrice as much you saved.
With these simple steps, getting a loan is a piece of cake no matter who the lender is. You need to act professionally and play smart; it is almost like a game. Good Luck!