It's not always easy to get a business loan, but you can improve your chances by knowing what lenders are looking for. Prove you're worthy for a business loan by following these steps.
Show how you plan to repay the loan. A bank or lender wants to know that you've got the capacity to repay a business loan. In your business plan, outline your income (revenue), expenses and expected cash flow. Your credit score needs to be high to indicate your good financial habits too. So ensure that you look over your personal credit and your business' credit (if any) to ensure that there are no errors that may lead a lender to turn down your loan application. You might also want to mention other options you have for loan repayment such as personal savings or assets you can quickly liquefy if need be. A bank wants to see just exactly how you plan to pay back your business loan.
Give the bank some type of security. You likely have a few possessions (personal or business) that you can put up as collateral to lessen the risk to the potential lender. If your business fails, the bank will be offered your buildings or equipment instead of the loan repayment. This is not ideal, but it does provide some reassurance to the bank. You will also want to mention another name or company that is willing to co-sign the loan with you, or at least accept responsibility for repaying the rest of the business loan if your business goes under. Banks will appreciate more than one type of loan guarantee such as this.
Show them the money. Although you may not have much, you should show the bank what you already have personally invested in the business. Identifying your capital shows that you have also taken a risk with your company. If the bank senses that you have confidence in the success of your business, they are more likely to see you worthy for a business loan.
Outline your specific financial needs. The bank will want to know the purpose for the loan. Have financial statements that lay out the cost for equipment you need to buy, if that's what the loan is intended for. Identify inventory you need to purchase to improve your business. Or show specific plans for capital improvements. Be as detailed as you can in your loan application. The more effort you put into your application, the higher your chances are of being approved for a loan.
Be professional. Along with all other parts of your business loan application, you're also going to be judged on your character throughout the interview. Your look, your demeanor, and your professional approach to the business loan application all goes into the banker's decision of whether or not you're worthy for a business loan. Prove your experience and education, be confident and go into the business loan application interview over-prepared. Everything from your looks, your education, your references and your experience will be considered with your loan application, so ensure that you give off a great impression. That's your best chance of proving you're worthy for a business loan.