At some point the life of a business, it becomes necessary to borrow money. Whether you are just starting up, or whether your established business is ready for expansion, additional capital is often need to take your venture to the next level.
Unfortunately, few of us have tens of thousands of dollars in immediate funds to accomplish our goals. A business loan can provide you with the capital you need to create a successful company. Getting that business loan, however, is a challenge in many cases – especially if you are a startup with no established business history.
The good news is that there are a number of organizations that can help you raise the capital you require. Traditional lending organizations, such as banks, are one option, but there are many other possibilities as well. Online seed capital providers, angel investors, venture capitalists, and crowdfunding opportunities are all available for your business.
No matter course you follow, though, you can’t just arrive with your hands outstretched. If you want the business loan, or if you want other types of funding, you need to show that you are capable of providing value in return. Lenders want to know that you will repay them, and investors want to know that they will likely receive something in return for their faith. Before you ask for money, consider the following 3 tips to improve your application:
1. Create a Business Plan
It’s hard for a business loan provider to have faith that you will be able to repay your loan (with interest) when you don’t have a plan for building a profitable business. In order to increase your chances of business loan approval, submit a business plan with your application. Your business plan should include the following elements:
- Executive Summary: This is a brief statement of your business concept, as well as your target market. It should also include information on important financial points, and what you need to start the business, as well as what the money will be used for. Your executive summary should also offer information about when your company started, and its legal organization. The executive summary is just that: A summary. It should be no longer than a page.
- Business Description: In this section, you share information about your business. What do you do? What do you offer? How is what you offer different or better than what others in your space offer? Describe how your company will be able to turn a profit, and how the capital you receive from the business will aid in your efforts to build a successful venture.
- Market Strategies: What will you do to position and market your company? Your business plan should mention strategies you will use to gain customers or clients, as well as analyze how you will compete in your industry.
- Development: Include information about your product or service development. Detail what you expect to spend for development, as well as overhead costs, and other expenses. Mention specialized personnel that can help you in this stage.
- Management Plan: Offer information on your management and operations. How do you expect to make this work? Also, include relevant financial statements to show where you are at (if your business loan is for expansion). If you are a startup, you might need to include personal financial statements.
Your business plan provides lenders with a clear idea of what you expect to do next, and shows that you have seriously though about how to turn a profit.
2. Improve Your Credit
Your chances of obtaining business loan approval will improve if you have good credit. An established business should have its own credit. Register with a business credit bureau (Dun & Bradstreet is a good example), and use the assigned number in your business dealings, asking relevant vendors and creditors to report. If you are a startup, it helps if your personal credit history is solid. Programs like Seed Capital offer you a chance to use your personal credit to receive an unsecured loan for your business. This allows you to begin establishing business credit. Look at your credit report, and take steps to improve it. Correct errors, pay on time and in full, and reduce your debt. A good credit score denotes a certain level of responsibility in financial matters, and helps lenders feel better about providing you with the funds you request.
3. Show Your Expertise
Finally, show your expertise and experience. Highlight business or management skills you have. If you haven’t much business experience, focus on your expertise in you industry. Include copies of licenses, certifications, agreements, and contracts. Explain why you know the industry, and what you bring to the table. Also, include information about who you plan to hire to offset some of your deficiencies in knowledge and expertise. You need to prove your competency so that lenders feel comfortable approving your funding request. This is especially important if you are seeking a business loan as a startup.
With the right planning and execution, it’s possible to improve the chances that you will be approved for the business loan you need to take your company to the next level.