After years of working for your boss you have the skill set, confidence, and business plan for launching your own business and becoming your own boss. The only missing piece of the puzzle is having complete knowledge of the requirements for a small business loan.
Like all types of loans these days, consumers are being scrutinized more closely then ever by loan officers. It is the goal of the lenders to make sure they find qualified, low risk customers. Before approaching any lender, the first requirement for securing a small business loan is having a solid business plan presentation, so the loan officer can consider your proposal and clearly see your plan and projections for the future.
According to the US Small Business Administration (SBA) the importance of having your small business plan cannot be stressed enough. In general, you may never get a second chance to make a good impression. Entrepreneurs need to pitch their lenders with a simple executive summary or pitch letter. Those applying for a loan should use this letter to concisely introduce themselves, document their professional history, state the amount of loan they are seeking, and include how the funds will be used, as well as a repayment strategy.
The SBA also suggest that additional information that may help individuals qualify for small business loans are:
- Business Description
- Type of organization
- Date of information
- Location
- Product or service
- Brief history
- Proposed Future Operation
- Competition
- Customers
- Suppliers
- Resume for chief officers
- Personal financial statements
- Projections
- Other paperwork, such as business licenses, leases, contract, etc.
Additionally a healthy credit history is important. More than ever, business people (either applying for a small business loan or for a job) are having their credit history review by their potential loan officer or even employer. The basic theory is if someone has their personal finances in order, they are less than likely to be a risk.
The biggest requirement for securing a small business loan is the ability to pay back the money in a timely fashion. The lender requires the borrower to provide a formal proposal on how they intend on paying back the loan. Factors such as the prospective business cash flow, industry relationships, credit history, and a solid plan of action are all heavily weighted when your small business loan is being considered.
