I’m often asked what the magic trick is to obtaining small business loans grants. I hate to be the bearer of bad news, but I’m afraid to reveal that there is no magic to it at all. Being successful in a loan or a grant application requires an in-depth process of planning and the fulfillment of a number of requirements. What is that process? What are those requirements? This article is here to help summarize the steps you need to take to have your loan request approved.
First of all, the number one requirement is having a good credit rating. Scratch that – you need to have a better than good credit rating. You need to have an excellent credit score in order to qualify for a business loan. If you’re wondering why that is then I don’t think you’re meant to be in business in the first place. Loans are only given out to those people who represent a low risk of failure to repay. Check out your credit score and see where you stand. If you’re at the low end of scale, you might to want to see what you can do to improve your credit rating before starting a business.
Second of all, any lending institution will look to your equity. Unless you’re able to put down a down payment of sorts in the neighbourhood of 10 to 20 percent, you’re not likely to have your loan request approved. Lenders want to know that they’re not the only ones with a financial stake in the venture. They want you to have a financial commitment to the project as well.
When applying for small business loans grants, the third thing lenders will look for is your experience. If you’ve never had management experience or some kind of relevant business experience, it’s doubtful that any lending institution will want to give you any of their money. After all, how can they be sure that you’re not going to mismanage yourself right into bankruptcy? They need as much assurance as they can get, and your experience helps provide that. As a rule, at least three years of relevant management experience is what you should have under your belt before applying for a loan.
Fourthly, there is the all important business plan. Explain your business in its entirety, from concept to long range plan. How do you plan on making a profit? How do you plan on reinvesting those profits? How do you plan on making back the money of the lenders? And don’t get too caught up in the vague generalities. Be as specific as you can, and include everything from income statements go cash flow to balance sheets in your plan.
Finally, most lending institutions will require some form of collateral before approving your application fro small business loans grants. In case your business plan isn’t carried out as expected and the profits don’t roll in like you expected, lenders want to know that they will have some sort of guarantee. Whether its property, inventory, stocks and bonds or the like, lenders want an asset that can be used to repay their debt should it be necessary.
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