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5 tips for Small Business Success in Getting a Loan
Let’s look over the main requirements of attaining a small business loan. What is your personal credit history? Do you have an up-to-date business plan? Have you recorded your experience in the field in which you are applying? What is your education? Are there other businesses in the same arena and what is the feasibility of the business you are starting or expanding?
1. Explore local banks. Start close to home. There is a trend on the banker’s side to get to know the local businesses. Don't assume the bigger the bank, the better your chances of getting a loan. Smaller community banks might be more willing to finance businesses in their areas, and their loan officers are more likely to give you individual attention and to fulfill their mission of supporting the local businesses.
2. Check out your own credit report. Examination of your own credit report before you start the small business loan application process can also put you ahead of the game. Lenders use your personal credit history to help them decide whether you're a good risk for a loan, so it pays to know what they'll find. If your report shows a problem, contact the credit reporting agency and demand a correction for all mistakes. When your credit report shows legitimate late payments or bankruptcies, you should include a letter with your application explaining the circumstances and how they've changed. This can soften the impact of any derogatory marks against you. Always be honest about your credit history — trying to cover up problems is the quickest way to failure.
3. Have well written business plan. Having a sound business plan is your best shot at getting a loan. But it also must be a complete and well-presented plan.How much money do you want? How are you going to repay the loan? It's especially important to refine your executive summary. It is a 1-3 page summary of your business. This gives the bankers a quick overview first — if they like what they see, they might read on.
4. Invest your own money. How much of your own money are you putting on the line? The best way to improve your chances of getting a loan is to put some of your own money on the line. Loan offers and bankers characteristically like to see that owners have at least a 25 percent equity stake in the businesses they finance.
5. Rent building, automobiles and equipment, don't buy. Bankers also favor businesses that plan to rent rather than purchase a building. That's because lenders prefer that you invest in assets that generate income, like inventory and equipment. Bankers also frown on high renovation costs where the small business owner would try to improve the facility inste4ad of getting the business going.
copyright 2008 by Titan Co.
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