Even in today’s economy, many businesses are still finding it difficult to secure small business loans. However, just because it may be difficult to have your loan approved does not mean it will be impossible. Below are ways you can prepare your small business for the loan application process.
Update your Business Plan
Banks require in-depth business plans as part of the loan application process. Be sure your business plan is updated and detailed before you walk in to apply for a loan. If your business is already up and running, revisit your projections, market analysis and marketing plan to be sure you have accounted for changes since inception. If you are just starting out, do not skimp on the business plan. This is your chance to show the bank you have done your due diligence—you know what you are selling and you are going to sell it, you understand who your competition is and have assessed the risks. Addressing risk may be one of the most important parts of your business plan. Every business faces risks. If you ignore them, a bank is likely to assume you have not considered the risks and are incapable of creating realistic forecasts. A meaty business plan that includes the good and the bad shows a bank that you are prepared, thorough and serious, which can instill confidence in a bank to lend to your business.
Do your Research
Not all banks loan money equally. Do your homework and find out which banks are best suited to meet your lending needs. Rather than waste your time applying for a loan at a bank that requires operating history, find a bank that specializes in younger businesses. Smaller, community banks are often more likely to lend to small businesses because they look at each application on a case-by-case basis, rather than larger institutions that use strict formulas when reviewing loan applications.
The best time to create a relationship with a bank is long before you need a loan. A bank that knows your business is much more likely to lend money to it. When you find a bank that meets the needs of your business, open an account with the bank and show your dependability by using the account. Spend some time getting to know your banker and let your banker get to know your business. This relationship can provide the foundation for the loan transaction when the need arises.
Don’t Give Up
The most important thing your business can do when applying for a loan is to be prepared and show your bank that you have planned for the unplanned and will still be able to pay the loan. Still, the reality is that no matter how much you prepare, you may not be approved for your small business loan on your first attempt. Do not be discouraged. It is common for businesses to apply to multiple banks before they receive approval for small business loans. Persistence is key.