How To Secure A Business Loan in the US?

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How To Secure A Business Loan in the US?

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 How To Secure A Business Loan in the US?

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Summary

  • A clear business plan would help lenders know what you intend to do with the fund.
  • Poor credit score, lack of proper business strategy may prevent you from getting a loan.
  • Exploring different loan avenues, depending on your business need, is key.

If you have a great business idea but short of funds, you will most likely look for a bank loan. But it is easier said than done since you will first need to prove your worthiness before they even decide to lend you. Your prospective lenders would ask you to submit a plethora of documents to evaluate your candidature which sometimes may be harrowing if not prepared.

However, if you go prepared, you would most likely be able to secure the funds you need. A few factors, though, which you will need to consider before seeking a bank loan. For instance, poor credit history, incoherent financial details, as well as lack of a proper business plan may prevent you from getting a loan and eventually cut short your entrepreneurial dream.

Although the capital outlay may vary from business to business, most organizations obtain a loan to set up new ventures or for expanding their existing operations, which may entail, for instance, purchasing of equipment, building inventory, hiring staff, or even renting a space, among others.

Here are a few strategies that may help you in obtaining a loan to kickstart your business.

Pic Credit: Pixabay.

Making A Clear Business Plan

A clear business plan would help your prospective lenders to understand what you intend to do with the fund or your loan objectives. It is an important first step that you cannot miss.

You should be able to layout a detailed plan about your business as well as how you intend to use the money to develop the enterprise. For instance, you should be able to answer why do you need the fund? or How much or how quickly you need it? And how will you repay the loan?

Whom To Approach For A Business Loan

Nowadays, there are very many avenues where you can apply for a business loan. For instance, it could be banks, private money lenders, or even credit unions. Besides these traditional avenues, there are also plenty of online lenders that provide such loans these days. Depending on the type of business and loan you need, you can select the one that is most suitable for you.

In addition to banks and credit unions, there are online lenders, such as PayPal and Kabbage, which provide different types of business loans. Also, microlenders, such as the Small Business Association (SBA) and Accion USA, offer loans up to US$5 million and US$250,000, respectively.

Evaluate Credit History, Repayment Plan

If you have a poor credit history or your business proposal lacks a clear repayment plan, the lenders may turn down your requests. To avoid such an outcome, you would need to evaluate some of the factors that may come in the way like your credit score, necessary documents to support your loan worthiness, tax returns, financial statements, as well as legal documents. All these aspects would be key to securing your business loan.

Other Loan Avenues

If you still find difficulty in securing a loan from traditional sources, there are other avenues like government business grants, loans from non-profit organizations, as well as crowdfunding. Platforms, like Kickstarter, can be useful avenues for crowdfunding or easy loans. Additionally, business credit cards, which allow borrowings as per credit limits, can also be used for loans.

Finally, irrespective of whom you may approach for funds, a solid business plan, a good credit history, your repayment strategy, and the profitability of the business would be key for the lenders in determining whether you are the eligible candidate for the loan.

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