Getting a loan for your business can be stressful. There is so much you need to have and so many procedures you have to follow. If you are not keen, you might end up being denied the loan several times. The only way to ensure you avoid such is by getting it right from the start. Here are a few things you need to know about loans and business:
The Bank You Go To
The type of bank you go to will affect your chances of securing a loan. For instance, it might be hard to get church loans from a bank that does not deal with such loans. You might also have to go to a smaller bank to ensure you secure your loan. The reason for this being, they are keener and might be more willing to help you secure the loan. Many large banks have bankers who are after a promotion. As such, they might not pay much attention to you and the needs you have. Smaller banks will take the time to listen to you. They are more likely to get you the loan or give you tips on what you need to secure the loan.
Have Some Collateral
When taking out a loan, you need to remember that the bank will need some collateral. As much as a bank can lend you money if you are a startup, you will have to prove that you can pay back the money. The collateral can be a personal property or business assets. Having collateral makes it easier for a bank to trust you than if you want them to trust you when you have nothing.
Have a Business Plan
While not all banks will need it, many require that you have a business plan. It does not have to be detailed. Either way, the business plan will help the bank know you and your business better. It will help if you had the plan with you.
Have a Document Containing Your Financial Details
To ensure transparency, have all your financial details with you. The details should include any loans or debts you might have had in the past or present. It should also include bank accounts, investment accounts, and a tax ID number. It is the surest way to ensure you are credible in the eyes of the bank.
Complete and Reviewed Financial Statements
You must have the balance sheets to your business assets, liabilities, and capitals. Ensure that these are the latest balance sheets. The profit and loss statement you have should go back at least three years. However, if you have not been in business that long, do not worry. As long as you have a good credit score, you can still be legible to access the loan. Just ensure that the records have been audited, as this increases their authenticity.
Your Personal Financial Details
Another important thing you need to have is your personal financial details. These include your security numbers, details on your net worth, credit card details, auto loans, and mortgages. If your business has multiple owners, you will need to have the other owners’ financial details. These details help the bank see if there is any risk involved.
Since taking a bank loan is a matter of risk, you will need your insurance information. Include all the information for the business and your personal insurance as well. It goes to show that your business is not so far gone that it cannot be salvaged.
Taking a bank loan is a risk that you might have to take at some point in your business. It might not be to settle an old debt or save the business. Sometimes you need a loan to expand your business. Even if you have not gotten to the point where you need a loan, chances are you will get there someday. As such, you must get your business details in order. Ensure your business details remain up to date at all times. In doing this, you ensure a smooth process when the time comes to securing a loan.