Budding entrepreneurs who are itching to expand their businesses will need to get the ball rolling by acquiring a small business loan. Unfortunately, in light of the economic downturn, banks have become more selective about the people to whom they issue loans. To ensure that you’re able to borrow the money needed to grow your business, put the following tips into practice.
Write a Convincing Loan Proposal
The first step to successfully acquiring a small business loan is writing out a loan proposal. Your proposal needs to clearly state why your business is seeking a loan and explain why approving this loan would be a sound investment on the part of the bank. If salesmanship isn’t your strong suit or you aren’t a particularly gifted writer, delegate this task to someone in your organization with a knack for creative writing. Instruct this person to use convincing language to accentuate the positive aspects of your proposal. As H. Capital CEO Amir Landsmen points out, the presumed profitability of a proposal determines whether or not his company issues loans to clients. Since this is the man who identified a gap in the market and deals with business loans on a daily basis, his words should be taken to heart.
Research Prospective Lenders
When shopping around for the right lender, it pays to do your research. Before committing to borrow money from a certain bank, sit down with a legal expert and carefully review the terms of the contract. As an added precaution, go online and look for feedback from other small business owners who have borrowed from this particular bank. Even after the economic collapse of 2008, certain banks still engage in predatory lending practices that have been known to bankrupt businesses and homeowners. While it may be tempting to go with the first bank that approves your proposal, taking ample time to explore your options will ultimately be more beneficial for your business.
Keep Your Business’s Financial Information Organized
When applying for a small business loan, there’s a good chance prospective lenders will request to see various financial documents. For this reason – and many others – it is imperative that your company’s financial records are meticulously organized. In some cases, a lender may visit your office and insist on having access to all of your business’s financial paperwork. If you’re unable to produce certain documents or there are large gaps in your accounting records, your business is liable to be seen as disorganized and untrustworthy, thus diminishing your chances of acquiring a loan.
Build Friendships with Other Business Owners
Building and maintaining friendships with other local business owners ensures that you have prominent members of the community to vouch for you when applying for a loan. If the bank you’re interested in borrowing from has worked with any of these individuals in the past, its loan officers are sure to take their praise for you into consideration when determining your eligibility.
With the economy still recovering from an unprecedented recession, lenders across the country have tightened their purse strings. However, by familiarizing yourself with how to capture banks’ interest, you’ll easily be able to borrow money and expand your business.