subject: Tips For New Business Owners [print this page] One of the reasons why most people are hesitant to start their own businesses is because of financing. Enough money is needed to bring those business ideas to life. Although you have saved your previous salaries or earnings for this new project, sometimes, it is not enough for all the expenses.
The great news is that entrepreneurs can turn to loan companies for help. New business loans or start up business loans are available either from banking institutions, credit unions, or commercial lending firms. The amount of loan money you can get will have to depend on the type of loan you have applied for.
Business loans can be unsecured or secured with collateral. Needless to say, if you will submit collateral as a guarantee for the funds you borrow, your lender will be more confident to extend a higher value. On the other hand, if you will apply for an unsecured business loan, the amount of loan you can get may be limited to a smaller value as it involves a lot more risk for your lender.
Factors that Can Affect Your Business Loan
What factors can affect your lending company's decision whether to grant you approval or not? As the owner of the business, your credit history will play a big role. Since you have not yet established a business credit history, your personal credit rating will be reviewed.
This is why new entrepreneurs are advised to seek business financing from the bank where they have existing personal accounts. If you were able to take out a personal loan from your bank, then you are more likely to be granted a business loan, provided that you have proven to be a trust-worthy customer.
Check your credit report at least six months prior to applying for a loan so you can correct errors or inaccurate information that may have been included in your file. In addition, it will give you some time to work on improving your credit score if needed.
Your purpose for obtaining a business loan will also be taken into consideration. In this case, you must be able to present an impressive business plan to convince your loan officer that you do deserve the financing you need.
Your business plan will determine whether you will be capable to perform your repayment obligations. Needless to say, if your business does well in the market, then you will surely be able to keep up with your loan payments. On the contrary, if your business fails, then paying back your business loan can become a problem.
It is important to take note that a prospective lender will analyze the potential of your business to succeed in the market. If your business plan is doable and promising, then you are more likely to be granted an approval.
Different lending companies may have varying requirements when it comes to accepting business loan applications. However, make sure that you have secured all business permits and licenses required by your State. Be sure to have these documentations ready before submitting your loan application so you can avoid delays with regards to the approval of your loan.
