What To Know Before Applying For A Small Business Loan
December 12, 2017 ·Small Business How-to
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Applying for a small business loan may seem like a daunting task. You may not know where to begin or what steps you need to take. Obtaining a loan is often necessary, however, to take your business to the next level — which is vital to retaining more customers and increasing your return on investment.
Diligent research on how to get a small business loan will make the process easy and provide you with the best results.
Cumberland Area Economic Development Corporation (CAEDC) is here to assist small businesses located in, or moving to, Cumberland County Pennsylvania.
1. Start With a Business Plan
Lenders want to see a thorough layout, expressing more than a simple idea. Whether you are getting your feet off the ground or rapidly expanding, a blueprint of your plan starts the process off well. It can provide the borrower and lender a thorough understanding of the business’ future needs and the support to drive growth.
If you need help with writing your business plan, contact the Small Business Development Center in Shippensburg for free assistance.
2. Determine How Much Money You Will Need
Create a budget on how you plan to use your loan money. A budget lets your lender see your vision on the overall idea and the details. The budget should include the project costs such as equipment, renovation, acquisition, and the sources that will fund these projects.
Determining the exact amount of money you need is a tricky task. Because small businesses don’t usually require large loans, overestimating can cause lenders to question your credibility. However, underestimating can lead to problems with working capital. A well-planned budget is crucial to showing lenders you researched the financial support of the budget.
3. Decide Where the Money Will Go
Certain loans are required for different business activities. For example, the Small Business Administration (SBA) 504 program provides long-term fixed rates for business owners. The low-equity economic development financing allows you to improve real estate or purchase major fixed assets.
Small businesses often look to save cash to solidify working capital, but the process requires down payments. View a variety of loan options available through CAEDC.
4. Prepare the Necessary Financial Statements
As a way to judge the reliability of clients, lenders look at your personal financial statements and your business’ profit and loss statements. You should focus on building both your personal credit score and business credit profile at the same time. Here are some examples of what lenders look at:
- Credit score
- Debt-to-income ratio
- Projections
- Three Years Tax Returns
- Personal Financial Statement
- Collateral to Secure Loan
The goal of assembling your paperwork is to assure lenders that your company is/or will be well managed and has an attainable plan.
Once you have accumulated the correct paperwork, submit and work with your lender.
CAEDC can assist you in finding a lender for your project.
5. Choose the Right Fit
People do business with those they trust — as do lenders. It is necessary to build a relationship with a lender before, during and after the process of getting a loan. Research the correct lender that is the right fit for your financial needs and that provides loan requirements that work with your small business.
Lenders can specialize in a variety of projects. If you would like a bank referral please reach out to CAEDC.
Get Started
Applying for a small business loan can be simplified by following the steps provided above. Stay organized and ahead of the game to have a smooth experience.
