BUSINESS CAPITAL is a very important factor in putting up a small business. You will need business capital no matter what happens when you are planning to become a small business owner.
In the previous post, the four ways how to raise funds was discussed. The last one mentioned was business loan. But how will you get a business loan? Why do most of the people who wanted to become small business owners were disapproved when they applied for a business loan?
Personally, I haven't tried applying for a business loan yet. Why? Because I wanted to follow the steps mentioned in the article I found in the official website of Entrepreneur Magazine: 10 Ways to get business capital from the bank.
I wanted to share to all of you this article as this would be helpful to you at least by being prepared before applying for a business loan. Enjoy reading :)
One of the greatest problems that entrepreneurs encounter is the lack of funding.
While most would use their savings or sell some assets to help finance their business, as a business grows, business expenses often outstrip the entrepreneur’s ability to independently finance them. It is often necessary for entrepreneurs to borrow from lenders such as banks to finance or expand their business.
However, given the economic downturn, most lenders are now more reluctant to lend, especially to startup businesses that don’t have prior credit records with them. Even if they do get them, startups are more often than not given loans at very high interest rates.
But according to Henry Go, a management and finance consultant with HiSYNG Business and Financial Consultancy, most entrepreneurs can avail of loans with good terms, provided they can impress their lenders.
However, given the economic downturn, most lenders are now more reluctant to lend, especially to startup businesses that don’t have prior credit records with them. Even if they do get them, startups are more often than not given loans at very high interest rates.
But according to Henry Go, a management and finance consultant with HiSYNG Business and Financial Consultancy, most entrepreneurs can avail of loans with good terms, provided they can impress their lenders.
Here are 10 tips Go says will help impress lending institutions.
1. Know your business
1. Know your business
This will immediately give comfort to the lender, for they will know that they are dealing with a serious borrower.
2. Be ready to submit
Thoroughly prepared documents as may be required by lender, for they will know that they are dealing with a serious borrower.
3. Consult a reputable financial advisor or consultant here
A consultant can usually provide the necessary inputs for putting up a credible business plan and come up with the number that best suits your requirements.
4. Do your research
If you decide to go through the borrowing process without a consultant, then scout around to find out which loan options and which banks best suit your needs.
5. Plan ahead
Anticipate the questions a lender may pose and have honest, well-researched answers ready. Decisions to lend are fact-based – don’t be idealistic when answering questions and providing projections.
Lenders will appreciate your practical perspective. It is also wise to organize all your documents prior to the meeting with the bank, for easy access to specific items when requested, and to show you meticulous attention to details.
6. Show sincerity
Given the tight credit market, managing risk is increasingly important for lenders. With this in mind, consider providing ample collateral toward your venture if possible. Your willingness to invest in your business – and in your success – reflects your own confidence in your plan.
7. Preparation before meeting with your lender is key
The time and commitment you dedicate in advance may help increase your appeal as a solid loan candidate in this competitive market.
8. Treat your lender as a business partner
You need to disclose everything about your company to your potential lender. Full disclosure about your financial position is essential in building an excellent reputation with the lender.
Giving a full disclosure also means not exaggerating the truth. It’s never a good idea to mislead the lender by making unfounded positive comments about the future.
9. Impress with a good reputation
9. Impress with a good reputation
Stay loyal to your lender. Keep giving them business and good projects and good deals. In other words, you can improve your relationship with lenders by also bringing them business.
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