Getting a Small Business Loan for Your Start-up

Getting a small business loan is similar in many ways to getting any other type of loan. You need to prove to the lender that you are a good credit risk and that you will have the capacity to pay the money back. If you are starting a new company, there are a few key things to know when getting a small business loan that will increase your chances of getting the financing you need. 

Getting a Small Business Loan

The first step to getting a small business loan is to make sure your business is credit worthy. This can be hard to do, since as a start-up you don't really have a business yet. The best thing to do is to create a business plan. A detailed business plan outlines your goals for the business, as well as how you are going to achieve those goals. The plan should include cost projections, details on suppliers, plans for how to market and sell your product and projections regarding income. The business plan must be realistic and use numbers that will give the bank that your business really is going to be profitable. Remember, though, the loan officer is a financial professional and will be able to notice if your numbers are inflated to make the business look like it's going to be more successful than an accurate prediction will suggest. 

Finding a Lender

Once you have a business plan in place, you can begin to approach lenders for a small business loan. There are a few places you can go to do this:

  • Local or national banks may give small business loans.
  • Credit unions may also give small business loans. These are generally smaller and more personal institutions than banks, and you may have more success working with someone at a credit union, especially if you already have an established relationship for your personal banking.
  • Specialized lenders. The local Small Business Association in your area may be able to point you towards grants and loans offered specifically for those who wish to start a small business. 

Making a Presentation

Once you have found a few lenders and have your business plan ready, the next step towards getting a small business loan is to convince them to lend you money. Usually, one of the most important aspects of a loan is the credit check. If your business has not actually started yet, then there will be no credit for the lender to check. Thus, the key will be convincing the loan officer that your business is going to be profitable. This is where your business plan comes in.

You should also prepare a good, solid presentation and know your business very well so that you can answer all questions intelligently. You want to convince the lender that you and your business are worth the chance of a loan.