A business loan is a loan taking out to help finance a companies needs. For a person who is trying to secure a loan for a start up company the process can seem daunting. Lenders know starting a business is a risk. It can be tough to start one and keep it going within those first few years. Should it fail the lender is at risk for not getting their money. It is up to the business owner to prove that their business is worth investing in.
When starting a business the owner has many hurdles to overcome. They have to prepare themselves for the process of securing financing. By being prepared they will ultimately help the lender have more confidence in offering them a loan and they will find that preparing for the loan process also will help their business out because they are going to be looking into every aspect of their future business.
Part of preparing to approach lenders for a business loan is getting together a business plan. A business plan is going to be the main selling point. The business plan should cover all aspects of the business. It is not something that can be simply put together. Developing a business plan takes time and effort.
A business plan needs to have sections that will explain and offer supporting evidence as to the financial future of the business. The business plan will outline the goals of the business. Include projected sales figures. It should also include expense figures. Putting together the business plan will require a lot of research into the local market and into the businesses target market.
The idea of the business plan is to show that the business can and will succeed based upon the research the business owner has done. By providing researched evidence, the business owner is proving to the lender that their business is going to survive and that they are well prepared to make sure it is successful. A good business plan can be the key to getting a business loan.
Besides a business plan it also helps if the owner has something to offer up as collateral. This can be property or money. The owner should be willing to make some sacrifice. This shows the lender that they are truly confident in their business venture. When a borrower secures a loan, the lender knows that they are serious. It takes away some of the risk and hesitation a lender may have in loaning money to a business.
A commercial loan is something that is often essential to staring a business or keeping one going. Lenders are often apprehensive about commercial loans, but with a professional attitude and a well prepared business plan, a companies owner should be able to convince a lender that they are worthy of their trust. Once the owner secures their first loan and honours the terms of the loan they should find getting commercial finance in the future is not as difficult.
James Copper is a writer for http://www.stop-repossession-today.co.uk where you can find information on stop home repossession
Business Loans FAQ:
Question: Can I get a small business loan or business credit card with EIN/tax id?
Also how else can i use this number for my business?
Answer: Sure, but you will have to personally guarantee it and use your ssn too. Eventually, with development of a positive credit history, it may qualify for it’s own credit. Your ein is used to report business taxes and to support your chosen form of business formation for liability purposes.
Question: Is the interest on a personal loan that I used to start a business a tax deductible expense?
Or does it have to be a business loan? I’m filling out a partnership tax return.
Answer: If the loan was used in the business, it should have been included in the partnership accounts. This would then be taken into account when calculating your share of the profits. There is no tax relief for loans against personal tax.
Question: Qualification for small business loan for new business?
Will securing a small business loan for a new business be based on my personal credit? What is the minimum a first time borrower will receive? If I am planning to purchase a house in the next three years and I secure a business loan this year will it affect applying for a home loan in the next three years?
Answer: Yes, depends on your current income and personal credit. Right now it’s extremely difficult to get any sort of business loan. I wouldn’t want to put a hard number on it, but I would venture that if your credit score is less than about 750, there’s little to no chance for a business loan. Additionally, you’re going to need something to secure the loan with, probably a house. Loans are very risky for startups, and banks aren’t lending much right now.
Question: How to get a small business loan?
I have an idea I want to expand on but I have only recent credit history, and no equity. After I get turned down by the commercial banks due to lack of business experience. Will the SBA Approve my loan with the commercial bank and take responsibility?
Answer: With a properly done business plan, an SBA 7A loan can be had and the Feds guarantee 80% of it.
Question: Small business loan/grant for people under 25?
I am looking for business loans/grants to help someone under the age of 25 start and technology based business for profit.
Answer: There are no grants to start a for-profit business. For Small Business Loans, you should see the Small Business Administration website. There is a lot of useful information there about what you need to start your own business, and how to successfully find and apply for loans to do so.
Question: Can you get approved for a business loan if you have a high debt to income ratio?
Should this matter since the loan will be paid back by the business and not the individual? I have good credit I just have a high debt to income ratio, should I be able to get approved for a $20,000 business loan?
Answer: If the business folds, the bank will contact you for repayment. Therefore, your credit rating will matter because banks will always assess the risk when handing out loans.
Question: How hard is it to get a business loan?
I have worked for a company for two years which has now been in business for 21 years. It is a family owned company and they are wanting to sell it now. They have given me first option to take it over because they know that I will take care of it and don’t want to sell it to someone random. I am only 24 years old and don’t own a home. My credit is good but I still thought it would be hard for me to get a loan.
Answer: You would generally be required to guarantee any business loan to purchase and/or operate the business, unless it has substantial capital assets (machinery etc) that can be pledged as collateral.
If your relationship with the owners is really good, you might discuss their extending you the credit. That is, you pay them over time out of operating revenue.
A third option, particularly if the business could be grown substantially, is to find an investor. There are plenty of “angels” out there…wealthy individuals that invest in such enterprises to beat market returns.
Question: Can a Small Business loan be used to purchase investment properties?
I’m entertaining the idea of using a small business loan to purchase investment properties for rental income and to renovate certain properties for resale down the road. Anybody have any opinions on this or know anything about it? Is this even allowed? What other options would I have?
Answer: I doubt it. But it is likely that the interest rate on a mortgage will be cheaper money than a SBA loan anyway. You could use the SBA loan to get your business started for operational expenses then get the mortgage to buy the first property.