Eventually, most small businesses need additional capital, whether for start-up purposes or to expand an existing business. The technical process is usually straightforward; you have to ask for the money, whether from a financial institution or a private individual. Either way, the lenders will have some hard questions that you have to answer to their satisfaction. Being properly prepared is definitely to your advantage.
The lender will want to know what the money will be used for and how you will be able to repay the loan. Therefore, you should have a detailed business plan ready at hand as well as cash flow projections for your business. Additionally, a bank or commercial lending institution may wish to review your tax returns.
Prior to your approaching the lender, you may wish to check your credit rating via a credit report. Chances are very good that the lender will order such a report. Check your rating before the lender does. If you do not have a satisfactory credit rating, try and repair it before seeking a loan.
Be well-versed in all the details of your business and its finances, present and projected. Remember that applying for a loan is partly dependant on presentation, not just documents. You have to make an impressionable pitch to the lender and be able to answer all questions satisfactorily.
One area that shouldn't be overlooked is how you plan to share the risk with the lender. How much are you investing personally? This is equally important to the lender as is your knowledge of your business.
Consider preparing to apply for a loan as if you were making the most important sale of your career. If you can adequately impress and convince the person sitting opposite you, you may close the deal.
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