While owning a small business is a dream for millions of people across the country, starting and growing a business can be challenging. In order to grow their business, many businesses will need to obtain financing from a bank. While obtaining a small business loan from a bank can be challenging, there are several things that a business could do to help ensure that they are approved for the loan that they need.
The first tip for obtaining a small business loan is to understand exactly what you need. Many small business owners know that they need extra capital, but don’t know exactly what they need it for. In order for a bank to provide you with a loan, they will want to know exactly what you will be using the money for. A business owner should put together a thorough business plan for the bank to review, including how the money will be used, what will be purchased, and how the financing will impact the business’s cash flow going forward.
Another tip for obtaining a small business loan is to ensure that all of your financial statements are organized an in order. When a bank provides a business with a small business loan, they will perform a detailed analysis of the business’s income statement, balance sheet, and cash flow statement. Because of this, all businesses need to ensure that their statements are organized and accurate. In many cases, it would be a good idea to have a third-party accountant perform a compilation, review, or audit of the business’s financial statements on an annual basis.
When a small business is looking for a loan, a business will greatly increase their chances of acceptance if the business owner is willing to put forth a personal guarantee. A personal guarantee from the business owner will mean that the business owner will have to repay the loan even if the business goes into bankruptcy. While some business owners are hesitant to do this, this provides extra security to the bank and could greatly increase the business’s chances of being approved.