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7 Tips for a successful business loan (DOC)

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					The economy is starting   to heal and small business owners are readying to
get back into business.   This includes borrowing money so they can
successfully start, buy   or grow their business. This article offers 7
tips to use when making   your application for your next business loan and
get a “yes” rather than   a “no.”

Money tends to rate high up on the list of needs for people planning on
starting or moving into business ownership. Here’s 7 tips if you need
start up financing for your business.

1. Clearly identify how much you have available.

The best place to start is yourself. If you have some capital available
to invest in a business this is a great start as other parties you
approach will take you more seriously. They will take you more seriously
as they want to see that you have “skin in the game.” Once your position
is clear, family and friends are the next to approach. If you say they
have money make sure it truly is available. There is nothing more
frustrating than approaching professional lenders with your well thought
out business plan showing a clear financial plan that includes a partial
capital injection from family and or friends. The lender then approves
their loan subject to the other parties contributing but then everyone
finds out the family and or friends have changed their mind and al the
planning by all parties has been a waste of time.

2. Identify what you need.

How much capital do you need and why? Is it to buy equipment, buy
inventory, pay a franchise fee, downpayment on a business or cash to fund
the business operation? There are different types of lenders for
different types of loans. Get the “why” worked out quickly so you can
find the right lender to approach.

3. Research your options.

There are different lenders that focus in different areas of the market.
The obvious place to start is your local bank or credit union. Hopefully
you have a good enough relationship to speak to the business development
officer at your branch or be referred to this person. If this position
doesn’t exist, ask to speak with the manager. If your bank can’t help,
ask for a referral to a lender that can but make sure it’s clear why you
need the loan so you are introduced to the right lender. If you’re still
looking for options, the Small Business Administration (SBA) has a wealth
of knowledge. Search online at www.sba.gov. If you still need options,
search the internet but focus on keywords that are specific to the loan
you need. For example, if you need a loan for cash flow and have accounts
receivable to use as collateral, use “accounts receivable loan” as your
key words and you will come across lenders that provide factoring. Once
you find some companies that can help, make sure you are comfortable
working with them and research the full costs and terms of the loans.

4. Support your loan application.
Wanting the money for your business won’t be enough. Proving you need the
money won’t be enough. A quality lender will want to see a business plan
explaining how the loan will be used, a resume detailing ownership
experience (and therefore the ability to repay the loan), education,
credit history and most important of all in today’s economy, the
appropriate management experience to run the business and therefore repay
the loan. If you need help on how to write your business plan, look for
the article I’ve written called “10 tips for your next business plan.”

Supporting your loan application also includes looking at your credit
score and credit history. These two points are important. If your credit
score is in poor shape and you can clearly explain why and the lender is
comfortable with the explanation, they may approve your loan. For
example, if you had an auto accident a few years ago that resulted in
medical bills that are now under control, your poor credit score is
explainable. Similarly, before applying for a loan get a copy of your
credit report. Often there are mistakes on your credit report. Get these
removed before applying for a loan so this problem is eliminated.

5. Build cash flow projections.

Lenders eat and sleep cash flow projections. This is what they do for a
living. The stronger your cash flow projection the greater your chances
of success in getting the loan approved. If this is not your strength,
get help from your accountant or someone who knows and understands cash
flow projections.

6. Sell your need.

Once you have the data built and ready to launch your loan application,
practice your sales pitch. Don’t over embellish but be confident, know
the ins and outs of why you need the loan and practice your response so
you come off confident. The lenders aren’t looking for a sales pitch but
they are looking to see that you believe and that if they need to
escalate your loan request to higher management, you will present
strongly and not have their judgment questioned.

7. Keep educating yourself.

As you work through each step of this process, ask questions. It’s
amazing how options appear from places you least expect because you talk
to a friend who knows someone at Rotary who specializes in these sorts of
loans. Alternatively, they may not be able to help you with that loan but
they can help strengthen you and your application so it gets
approved…which is what this all about in the first place.

Obtaining a loan or finance for a business has been very difficult.
Because the economy is stabilizing and government programs are beginning
to have a positive effect, loans are available as long as you the
borrower, present a professional business case

				
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