Starting and running a business can be quite expensive. A great deal of financial assistance is often required, but fortunately, the adequately prepared business owner may have recourse to a bank loan. Acquiring such a loan is not a given however, and business owners need to take a few preparatory steps in order to secure one.
Be Ready To Recompense
This may seem obvious to some, but it is of the utmost importance for the small business owner to have a means of paying back his loan. Failure to persuade a banker that one has ways of making good on his loan will result in a refusal to grant it. Convincing a bank to give a loan involves assuring them that the business plan is solid and that their loan will contribute notably to the financial well-being of the company. There is no need to embarrass oneself as one of the 3 percent who default on bank loans.
Maintain Excellent Personal Credit
Maintaining adequate personal credit is more easily said than done and once it has been compromised or negatively impacted, the consequences may be difficult to reverse. Unfortunately, one of these consequences may be the inability to acquire a business loan. Before requesting a loan from the bank, acquire a history report of one’s credit and review it for potential errors. These mistakes may lower credit score beyond what is warranted and will needlessly hinder the business owner from acquiring the loan.
Ensure Possession Of Appropriate Documentation
Determine what kinds of documentation are required for the loan application. Doing this involves contacting financial resources such as one’s creditor and employer. Even if one has excellent credit, a request for a bank loan may be rejected simply because an incomplete application was submitted.
Get It Right The First Time
Despite one’s best efforts, it is simply a fact that a loan request may be rejected. While it is possible to apply for a loan again, too many loan applications can devastate one’s credit, which will, ironically, seriously hinder acquiring such a loan in the future. One way of avoiding this is articulating plans for the money in detail for the bank. For example, if requesting a personal loan for either debt reduction or home improvements, it is important to make this known to the lender. The lender will be interested in knowing what the applicant’s plans are for the refunds. Failure to adequately explain oneself to a lender may result in a rejection.
More Can Be Less
Finally, the small business owner may find it wise to start small. Shoot for as small a loan as possible and make do. Applying for too large a loan, especially when one’s credit is less than stellar, can result in a rejection.
This article was written by Daniel Calder at Examiner.com.