How to Navigate Start-Up Business Loans
Business idea: pitched. Plans and strategy: solid. Now, all there is left to do is apply for business finance. Before paying a visit to your local bank manager, it’s imperative that you methodically document your needs and align them with your goals.
Seeking a business loan isn’t just about knowing how much you need to borrow and when you can repay the amount. You’ll need to consider how much your investors intend to contribute, what assets you can use to secure the loan, whether you have existing debt, and how you intend to repay the loan.
When you account for every aspect of your potential loan before you consult with a lender, securing finance becomes seamless and stress-free.
How Much Should You Borrow?
How much financing you need will ultimately depend on your immediate objectives. As a rule of thumb, borrow as little as possible but just enough that you won’t have to seek a new loan for a healthy period. Include a buffer in this amount to avoid having to renegotiate your estimate.
How Should You Service Your Loan?
You should have the ability to pay back whatever you borrow given the period on your loan. As such, you’ll want to provide your lender with the following documents:
Personal Financial Statement
This document should outline everything of value that you own, your income, and living expenses. It should detail how much you intend to take from your business as a salary or wage and if you have another existing source of funds in reserve.
Every lender wants to know that their money is going towards something promising. If your business plan appears plausible and even favourable, it’ll only work to your advantage.
Cash Flow Forecast
Some lenders will request that you provide a statement reflecting on how you foresee your financial success to pinpoint any risks and areas for growth. Outline monthly profit and loss projections and how you intend to achieve projected profit margins. Account for any additional costs to attain higher sales.
If you’re offering real estate as a means of security, you’ll likely have to throw in an appraisal as well. If you own commercial property, include a copy of the lease.
How Will You Run Your Business?
Other than your business plan, you’ll need to relay information regarding ownership, management, and operational structure, among other things. Identify whether your business is a corporation, partnership or sole proprietorship.
Provide any evidence of receiving legal and financial advice and include other necessary details regarding your business. Essential information should consist of what you’re selling or servicing, locations, data regarding your industry and competition, and the details of your lease terms.
Many new business owners will wrongfully assume that securing a business loan is a straightforward process. Remember, your lender is taking a risk on your success and wants to know that your profit goals are realistic and achievable.
With Business Loan Experts, you can quickly secure a small business start-up loan and even discuss and craft your upcoming plans. We know best that planning is the backbone of business success and are more than happy to support your greatest ambitions.