When you are starting a small business, one of the first things you will probably need is a loan. Business startup costs are high, and unless you are going in very wealthy, you will need some extra cash on hand to get off the ground. Unfortunately, getting small business loans approved can be extremely difficult, especially if you do not have someone wealthy to cosign the loan for you. Here are some tips to help deal with lenders and improve the chances of small business loans being approved.
The first thing you need to consider when shopping for loans is how you are going to promise value to the lender. Small business loans are a big gamble for for the lender; most small businesses fail, and they are putting themselves at risk of you filing bankruptcy and never giving them back their money.
Applying for a loan is like applying for a job. You need to show the lender that you are a good investment for them, and that they will make money from you. However, instead of doing a job for them, you are showing them your idea to turn their money into more money, so that they can take a cut themselves. Without a strong business proposal, your loan will be turned away because you are considered a high risk.
Crafting a stellar loan application, therefore, is the absolute most important part of applying for a loan. You must convince the lender that there is absolutely no chance that your business will fail, and that investing in you means a guaranteed return on their investment. There are lots of business startups looking for money, and only the very best get funded. Be prepared to offer collateral in case things go wrong; you may need to put your house or savings on the line.
While having a solid, professional plan in place is important, the little things matter too. The person in charge of approving your loan is just that; a person. By making a good impression, you vastly improve your odds. Dress professionally, and give off an air of confidence. Just as important as making your plan make logical sense is giving the lender the emotional feeling that you know what you are doing and your plan is going to work. Practice your pitch in the mirror, and be convincing. Showing the data confidently will make your pitch much more believable.
When deciding your plan, also make sure to ask for a realistic amount. It may seem safe to ask for more money than you think you need for emergencies, but the higher your amount, the less likely your offer will be accepted. Be realistic about the amount you can borrow, and try to get the rest from elsewhere if possible.
Most of this type of loan are declined, because most small businesses fail. If you want to ask for a loan, you will need to look like one of the best small business ideas out there. Cement your plan, be confident, and dress for success to give yourself the best chance!