Opportunity is not always hard to come by in terms of U.S. business loans, however tight economic conditions such as recession can make credit standards higher. Nevertheless, even in periods of economic recession private, commercial and government lenders such as the Small Business Administration (SBA) can be found to finance existing business operations with both secured and/or unsecured loans. Of course to acquire a loan a loan application or bid needs to be approved, and that is a key step in obtaining a business loan. Getting approved for business loans takes into a account several important business related factors that indicate a businesses performance.
• Credit rating
• Collateral
• Business model and history
• Market share
• Financial statements
• Tax status
• Financial ratios such as debt/equity, turnover, and profit ratios
An additional factor contributing to financing of business loans include the ownership and management of the company. Lenders may look at management skill, know how, and experience in assessing the application of any financing. The loan application itself can also have an impact as this is how the applicant presents his or her company to the fancier. The following tips provide additional information regarding the loan application procedure.
Research banks and bank loan products
Banks often refer to their loans as "loan products", a somewhat detached and objective perspective on the nature of financing which can be a good thing in business. Surveying different banks for their loan products puts the loan seeker in the driver's seat. At this stage in the game forget about pleasing the bank, find the bank with the "loan products" that pleases you, after all, they will be getting paid to finance you if the loan is approved.
To research bank loans let no stone be unturned and look high and low for a bank loan that has a competitive interest rate, low collateral requirements, flexible and venture minded approach to loans, in addition to credibility, reputation and other banking services. After finding this ideal bank, or a close to one can find, this bank could end up financing future loans and bank activities so keeping that in mind may also be useful
Prepare a good application and/or business proposal
All business loans from banks come with applications and these applications along with professionalism, character, credit rating and business or project plan are what will determine if the loan is approved or not. If the business is already in operation and has a proven track record of moderate or better success acquiring the loan will probably be easier as the history and collateral within the existing business can provide an application with a lot of credibility. In such case, the new project should rely on the viability of the project while also highlighting past performance.
Start up business loans can require complete integrity, know how and commitment to have a chance at success. The reason for this is start up companies have the greatest statistical chance of failure within 5 years of operation. Banks know this and will likely be conservative in their analysis of the application. A good business plan can nevertheless achieve financing. Furthermore, business plans project market growth, market saturation, product and/or service practicality, accurate cost and sales estimates, marketing strategy, inventory and asset management, bookkeeping systems etc. Essentially, every detail is important when planning a business because things can and do go wrong and being prepared for those circumstances is essential.
Types and amounts of business loans
Depending on the size and scope of the bank, the type of loans available may be large or small, collateralized or uncollateralized, high or low interest, subsidized or unsubsidized. There may even be some international banks willing to finance the business so excluding those options right away might not be prudent. A few of the types of loans are included in the following list.
• Lines of credit
• Cash flow loans
• Credit Cards
• Start up or Seed Capital
• Equipment loans
• Project Development loans
• Debt refinancing loans
Some of the above loans are easier to obtain than others. For example, credit cards are easier to obtain partially because the interest rate is so high it lowers the risk for the banks. With the lowered risk of return, the banks are able to offer more credit loans but base the amounts of these loans largely on credit history rather than usage. Many of the loans other than seed capital loans can be applied for online and receive a fairly quick approval depending on the bank. The amounts of these loans can range from a few thousand dollars or less to a hundred thousand dollars depending on the needs, size and cash flow of the business.
Obtaining a business loans may be a challenge, but can be a viable alternative to independent business financing. Some types of bank loans may be specific to businesses already in existence and are consequently aimed at financing operations rather than establishment. Nevertheless, some banks and lenders do have start up and seed capital loan programs but the application process tends to be more scrupulous. For this reason a new loan applicant might be advised to distinguish between loan products and pay close attention to application guidelines. Additionally, various loan products for businesses some offer better rates and terms than others making research of the different banks and available loans quite useful.
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