You have a great idea for a new business. You've drafted your business plan and even found the perfect location. There is only one thing left to do—secure financing. For many, getting a loan for a small business is one of the most stressful and challenging parts of the entire process. But it doesn't have to be. Here are a handful of tips that can help simplify the process of securing a loan for your business.
Build a Relationship
Many of the large financial institutions that offer commercial banking services also offer personal account services. It's great if you can build a relationship with the institution before requesting a commercial loan by getting a personal account.
When you have a personal account, the bank gets an idea of who you are and what your financial habits are, and this can establish a sense of trust. While your having an account won't automatically secure you a business-loan approval, financial institutions are often more eager to extend loans to people whom they believe they can trust.
Avoid Business-Plan Errors
When you submit your application for a business loan, you will generally also be required to submit a business plan. It is imperative that you triple-check this plan before submitting it. A discrepancy, even a minor one, can cost you an approval. In terms of seemingly minor errors, even a grammatical mistake can cast you in a bad light and make you look unprofessional—possibly leading to a denial.
In terms of larger mistakes, things such as overestimating your earnings can impact your credibility. Instead of just offering you a reduced loan amount, the bank might just deny you outright.
Get Your Finances in Order
Once your business has been open for some time, should you need to contact the bank for further lending, they will be able to rely on the financial history of your business. However, when you are starting a business, the bank can only depend on your personal history.
Before submitting your application, it's important that you have your affairs in order, particularly when it comes to your credit score. It doesn't matter how solid your business plan is if your credit score is on the lower side: you will significantly reduce the likelihood of your loan being approved. Pull a credit score and see what changes you need to make well before submitting your application.
Make sure you are taking the necessary steps to improve your chances of a loan approval. Visit sites such as http://www.crossplainsbank.com to see what banks you might be interested in working with.