Whether it is the necessary funding needed to get a business off the ground or to acquire more equipment, employees, etc. it all begins with filling out a business loan application.
The first and most important step in properly funding a business venture is not seeking business capital too quickly or requesting too much money. By requesting too much funding or going after it when not fully prepared, businesses can find themselves in a hole that can be tough to dig out of.
Review Factors Prior to Applying
Present or first-time business owners should review several factors before seeking a loan:
- Is the business plan (including cover letter) professionally written and are all bases covered?
- Are all known assets and liabilities noted?;
- Know and review one’s business credit score and how the ratings agencies view the number;
- What will the funding be used for and what is a realistic timetable in paying it back?
Knowing the answers to the above items is important to decide the form of business loan, how much is needed and how it will best serve the company over time. It will also help business owners in avoiding a rejection from a bank, something that can have a very negative impact in more ways than one.
The start of the process involves working with a commercial loan officer to determine what needs to be approved.
Of utmost importance is having all the paperwork in order at the time the application is presented, including the company’s plan, items of incorporation, cash flow statement and balance sheets to name a few. Keep in mind that loan officers receive countless applications on a daily basis, so it is important to make one’s application stand out.
Cover Letter is of Utmost Importance
Just like when applying for a job, business owners need to have a stellar cover letter to accompany the loan proposal.
Given that the cover letter is one’s first chance to sell their loan and describe in detail how the loan will be used, make sure it is well constructed and personal (not a generic proposal) sent to dozens of lenders. Assuming one has had initial conversations with a loan officer; tie the cover letter in to those discussions so it is more personal. For current business owners expanding or starting a new venture, be sure to note the key players in the company and the experience they bring to the table.
Whether a present business or first-time applicant, individuals need to document where the funding will be directed.
For those individuals applying for loans involving office needs, be sure to put together a documented list of requirements. Among the items will be: Salaries, lease/rental deposits for office space, office equipment (computers, printers, etc.), office furniture, business licenses and/or permits, business insurance and advertising.
In re-checking a business loan list, make sure to have the following covered:
- Personal history (use of credit, work experience, etc.);
- Business plan (cover details as to why the loan is needed, where the money will be dispersed, how the business will pay back the amount borrowed and most importantly when);
- Amount applied for (Start up expenses and overhead, needs for payroll and inventory).
Funding a present or new business doesn’t have to be hard; it just takes the know-how to get the funds in the first place.