If you’re looking to start a business, you have to concern yourself with funding. How will you pay for everything? Where is this money going to magically appear from? Some people are lucky enough to find angel investors while others have been saving money for years. Still, the most popular way of funding a small business is with a loan.
How do you get a business loan for your startup? The act of getting the loan is straightforward, but there are a few steps to follow before submitting the application…
Research the different loans available
Begin by looking at the different loans available to you. They will usually come from banks, but some will offer better rates than others. Collect as much information as possible as you need to try and figure out which one is the best for you. There are sites like pigly.com that have loan calculators you can use to work out the overall costs with interest involved. This gives you a great idea as to which loans are the ones to go for. You may find that some are significantly less expensive than others.
Figure out how much you will need to borrow
Ideally, this will be done before you start running any loan calculations. Look at your business and work out how much money you need to set things in motions. This is a painstaking process as you have to go through all of your expenses and work out what they cost. Plus, factor in some additional money to fall back on as your business has a slow start. Once you’ve worked out how much you need to borrow, it’s time to apply for the loan.
Prepare an extensive business plan
Lastly, you have to put together a full business plan. This will detail everything there is to know about your business. It will include your goals and vision, showing where you want to take your business. You must also show forecasts of how much money you expect to earn over the coming months and years. The point of this is that lenders need to know if they can trust you or not. More specifically, they won’t give a business loan to someone that doesn’t have a clue. If you’ve got no plan – or the plan seems a bit rubbish – your application will be denied. Banks need to be sure that this isn’t a waste of their money.
Why? Well, think about what happens when your business doesn’t do well. You fail to repay the loan, probably file for bankruptcy, and most of the loan is wiped out. So, the bank loses a lot of money by taking a risk on your business idea. Thus, you need to develop an exceptional business plan to make them approve your application.
If you follow these steps, you will get a loan for your small business. Now, you’re armed with all the money you need to start your company. This is where things get exciting and stressful as you prepare for liftoff!