Bank loans are a great option, but before you go that route, make sure you’ve done your market research and can demonstrate that your business will do well in your area. If you haven’t had any luck getting loans from traditional lenders, look for a lender that offers SBA-backed loans, since they’re geared specifically to the needs of small businesses and are only open to those who can’t get funding elsewhere. Other financial options include online alternative lenders, which may be less restrictive in who they approve, but also tend to charge higher fees and rates.
In addition to building a relationship with the loan officer, you want to find out what exactly they need to see in your business plan. Go in with your plan already written and numbers in your head so you can confidently and intelligently discuss your business model, and ask the loan officer what specifically they want to see from a business plan. Take the time to revise your current business plan to match what the loan officer wants before you go back to the bank for your actual pitch.
Many banks and credit unions offer financing for franchise purchases, so be sure to compare any franchisor lending rates and terms with these. When you approach a bank, be prepared to disclose all your financial information. While your credit rating is important, you’ll also need to provide a personal financial statement, copies of tax returns and information about the source of your down payment funds.
To start your application for a business loan, calculate how much money and what kind of loan you need. Then, gather the necessary documents, including a profit and loss statement, balance sheet, cash flow statement, tax documents, and a detailed business plan. Once you have all of your information, approach lenders, such as the Small Business Administration, banks, and credit unions, and complete the application for the best loan for your needs. Finally, wait to hear back from the lender and be sure to thoroughly review the terms of your loan.
Starting a small business typically involves a lot of moving parts. In fact, time management can quickly become a challenge for entrepreneurs who are digging into the business start-up process for the first time. I compiled a list of 10 of the most important steps involved in starting a business and broke them down into easy-to-follow tutorials. Use this guide to make sure you're focusing your attention on the most important stages of starting a business and find out what you need to know so you can streamline your work for each of those steps.
To comfortably repay your loan each month, your total income should be at least 1.25 times your total expenses, including your new repayment amount, Darden says. For example, if your business’s income is $10,000 a month and you have $7,000 worth of expenses including rent, payroll, inventory, etc., the most you can comfortably afford is $1,000 a month in loan repayments. You can use Nerdwallet’s business loan calculator to determine your loan’s affordability.