Small Business Loans

All kinds of businesses take out loans, and the small business owner is no different. Typically, we think of commercial loans for large corporations, or massive projects such as a retail shopping center or hospital. But what about the "Average Joe" who simply wants to open a small bookstore or coffee shop?

Don't think that just because you aren't a big business owner that you don't have options or that it will be difficult to obtain a loan. Do your homework and become familiar with the steps you need to take to increase your chances of getting a loan and achieving your dreams! There are important steps to take before you apply for a loan, and the first one is proving to the lender that you are committed to your new business and to paying back the loan. Having a business plan to show to your lender is a good first step in proving your commitment to your new endeavor. If you don't know how to write a business plan, you can find help on the internet, books, or even people who specialize in creating business plans.

It's important to thoroughly prepare yourself before applying for a loan the first time. Your goal is to get approved with your first application. If you get denied, your application will show up on your credit record, thus decreasing your chances of getting approved the next time.

There are many reasons why small business owners need loans. Unfortunately, getting a loan to start up your business is the hardest. It's important to re-emphasize the importance of having a written business plan and demonstrating a commitment to your new business. You need to show that you know the industry you want to enter. The more you know and the more commitment you show, the better your chances. Prove that you have in-depth knowledge of the industry, and prepare an analysis of your market, projected expenses and income, and any other important details. If you have your own money or collateral that you're willing to commit to the business, all the better.

There are several key areas that lenders use to evaluate potential borrowers. If you already have an established business, the lender will focus on the company's credit and outstanding accounts. If your business is less than three years old, your personal credit will be evaluated.

For an established company, cash flow will be evaluated, which includes audited results and detailed future projections. Lenders usually require a cash flow that is 1.25 times the total cost of your company's total and expected debt. If you have collateral, such as real estate or valuable equipment, the lender will consider this as property to be seized in case you default on the loan.

The management team you have will also affect the probability of your loan being approved. Your management team's experience, tenure with the company, and familiarity with the industry all affect your chances of getting your loan approved.

Finally, lenders will look at your capital and equity. The total value of your cash on hand, equipment, facilities, and other tangible assets will affect your chances of getting a loan approved. Lenders will typically do a debt-to-equity ratio and look for total debt of no more than 3 or 4 times the equity.

Lenders will also always look at proven profitability and the quality of your business plan, in addition to the above factors. Doing your best to prepare prior to applying for your loan will increase your chances of getting approved.

Select Service:
Property Type:
Credit Rating:
Get Started Today! Become a real estate developer or investor