Steps for Securing a Business Loan

Get started on the right path to acquiring the funding you need.

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July 30, 2015

A business loan is a form of financial aid offered by a bank to an entrepreneur or a business group. The capital can be used to get a business venture off the ground or keep it afloat. When used properly, the business loan can be a great contributing factor to a company’ success. Acquiring one is no easy feat as it means convincing an investor that their money is in safe hands and will be used to bring in more.

It's therefore important to know which steps to take to secure a business loan.

Below are ten recommendations on what to do to get the capital investment you need.

1. Choose your investor wisely

This is the first and the most important factor that you should consider when trying to secure a business loan. Investors are more often than not banks but you can have non-bank lenders such as self-help groups, larger business organizations and individuals. When choosing a lender, it is important to identify one that understands your business and has a history of giving financial aid to others with ideas similar to yours.

2. Make a comprehensive budget

It's important that before you go asking for funds, you know exactly how much you need and what you plan to use it for. Preparing a budget, profit and loss statements, etc. is important not just in acquiring the business loan but also in ensuring that the money is used in the best way if you are successful in securing the business loan.

3. Prepare a presentation on financial history

Most lenders require a detailed account of the financial history of the business and the principal owners. Cash flow patterns help the lender assess your credibility as an individual and as a business. If your financial history shows that the existing business is profitable then your chances of securing a loan increase significantly.

4. Present an organized business plan

A well-prepared business plan gives an outsider an idea of what the business is about and what it is capable of accomplishing. When preparing one, include information like what inspired you to start or want to start the business, what you hope to accomplish and how the business will be beneficial. A good business plan is set against a timeline and this gives the potential lender more confidence in you and your business as a determined individual or group.

5. Join forces with larger organizations

Working with larger organizations increases your chances of securing a business loan. Association with established organizations that have built a name for themselves increases you credibility before potential lenders.

6. Prepare your loan package in advance

A loan package is a group of documents that are required when seeking a loan especially when the lender is a bank. A basic package should contain properly filled loan application forms, your business plan, personal information and your guarantor’s personal information. If the lender requires more, they will usually inform you in advance.

7. Have credible collateral

Lenders are naturally skeptical about parting with their money.

It is therefore important to have valuable property available to be offered as collateral in the event that you are unable to pay them back.

8. Be open minded and ready to compromise

When in pursuit of a business loan, you should be ready for the possibility of not being successful and getting what you want. Be open to other options such as the less popular non-bank lenders when mainstream options fail.

9. Be confident and of good character

First impressions can make or break your chances of getting a loan. When meeting with your lender or their representative, make sure that you are well dressed and groomed and that you present your proposition confidently. Be honest and maintain your integrity.

10. Be patient

After doing all these things, be patient and give the potential lender time to go through your presentation and make up their mind.

The tips given should have you headed in the right direction in your pursuit of a business loan. You should, however, have backup plans in the event that you are not successful in securing a business loan. Preferably legal ones. A great option, in this case, would be to start from scratch and save up until you have enough to get your business up and running.