You have a good idea and a lot of enthusiasm for a new business but you need money, probably in the form of a business loan.
How do you get a business loan for a start-up business? A bank loan for a new business or to buy an existing business is the hardest type to get. The bank has no business history to look at in order to evaluate your ability to repay the loan. It has no personal history about your to determine your ability or willingness to repay. Follow these steps to improve your chances of being approved for a start-up loan.
Prepare an in-depth analysis of the market:
You must show the bank that you understand the market and industry in which you are about to enter. As part of the business plan that you present to the bank, you should include a detailed analysis of the market, the customer base, and the broader industry. Include a statement of how much market share you think your business can capture and how that translates into dollars. Based on similar companies in the industry, develop income, expenses, and cash flow projections for the business. This will help convince the bank that your firm will generate the cash flow necessary to repay the business loan.
Account for where the business loan is going:
Many new business owners greatly over – estimate the amount of money they need. When you are developing your business plan, make your estimates as exact as possible and justify how much you need for each purchase. If you apply for a loan and do not justify how you are going to spend the money, you will be rejected. On the other hand, if you account for every penny in your business plan, you are far more likely to have a successful application. You should even prioritise your need for funds. For example, if you are applying for a $50,000 loan and $25,000 is for equipment, show that in your business plan. State the type and purpose of the equipment you are going to buy. Go ahead and account for the remaining $25,000.
Share your business experience with the bank:
If you or any of your management team has experience in the industry, share your experience with the bank in your business plan. The more experience you or other principals have, the better, particularly in the same industry. If you have experience in the industry, the bank will have more confidence that you know what you are getting into and how to handle the financial challenges of the business, including repayment of the loan. If you have a colleague that is going to participate in the business that has experience in the industry, that will be helpful with the bank as well. If you don