If you cannot pay for a business investment upfront, you may need a small business loan to cover your expenses. Getting a small business loan is not always easy, especially if you have limited business credit or bad personal credit. Nevertheless, there are some things you can do to improve your chances of getting a loan. Here is a guide explaining how to get a business loan.
You may be able to apply for a generic loan for whatever money you can get, but most banks will want you to apply for a set amount of money. You need to determine how much money you will need for your project, including extra fees that may come up along the way. It’s better to ask for a little more than you need than to secure a loan that is not enough to cover the project.
If you have a car or a home that is already paid off, you might be able to use it as collateral for your loan. This will give the bank something to repossess in the event that you don’t pay all of the money back. Of course, this puts you at risk, but it gives you a much stronger chance at securing a small business loan. You just have to make sure that your collateral is closely valued to your loan request.
You are going to need to show the bank that you can pay for your loan on your own. That means you need to provide proof of income. For self-employed people, this may be in the form of past tax returns or personal bank statements. If you have a job outside of your personal business, you may be able to use your pay stubs for proof of income. This will all depend on the requirements your lender sets out.
Write out a business plan that explains what you plan to do with the loan money. If you can show them that this investment will grow your business, the lender will feel more comfortable giving you the funds. This will also give you a guideline to follow in the future so you can allocate the money accordingly. As long as you pay the loan back in a timely manner, you will be able to use the money to build your business and your business credit at the same time.
Talk to a lender about your loan options and see what it might take to secure the financing you need.