The only way to know for sure if you will qualify for a business loan is to apply with a lender. Here are some things to consider though if you want to judge for yourself the likelihood that you will be able to score a business loan.
Start Up Businesses
If you’re looking for a loan for a start up business, it might be harder for you. First of all, you will need to have some of your own money to put into the business. Owner equity injection is a key way that lenders are able to see that the future business owner believes in the risk themselves. One option, if you don’t have a lot of cash for start up is to look for a microloan program. These sometimes only require a 10 percent owner equity, though some require at least 30 percent owner equity. The more money you’re willing to put into the business, the better it looks to lenders. Why would they want to take a risk on you if you’re not willing to take a risk on yourself?
Do you have any collateral to secure the loan for your business. Both personal and business assets can be used for collateral. Lenders need to see that there is a way to repay the loan if it goes into default. They’ll also examine whether you’re willing to personally guarantee the loan.
Existing Businesses
If you have an existing business or wish to purchase an existing business, it’s easier for lenders to judge the likelihood that they will get paid back. Still, when a business already exists and is running, that means the bank will want to see more proofs. They will want to know the qualifications of your management team. They will want to see your inventory records, financial records, and marketing plan.
If you’ve never owned a business, you will benefit from entrepreneurial classes. Positive experiences in previous businesses looks even more favorable to business lenders though.
RE/MAX Keys Connection
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