What is the most important factor in getting a business loan?

Question

I am in the process of writing out my business plan for a start up company, of course I have very little capital and am considering a business loan. What would you say is the most important factor in getting a small business loan of say $15,000. I have no previous financial statements for the business, and I will be putting in $2500 of my own money.

Answer 1

Financial institutions look for a couple main things when approving a loan:

How will your company repay the debt? Include any projections, rental income, etc that will be used to repay the bank.

Collateral - what will you be securing the loan with? property, assets, etc.

Your money - on average, banks will want you to put down 15%-20% of the loan amount into the company of your own money, especially if you're buying a building.

Personal credit - you'll need to personally guaranty the loan if you're a 20% or greater owner - make sure you're credit report is excellent

Experience - banks can be somewhat leery lending to a new company. This is because so many new companies fail. Make sure to include all experience you have in your field. If you'll have any partners, etc make sure to include their biographies/experience as well.

Answer 2

The business of lending is a dense one and should be researched properly. To get started, I suggest contacting the Small Business Administration (SBA). Entrepreneur also offers a great site dedicated to money & finance – see below for both.

Research, research, research – this cannot be stressed enough. Read as much as you can about the process. Here are some book titles that are relevant:

* How to Get a Small Business Loan: A Banker Shows You Exactly What to Do to Get a Loan (Small Business Series, No 1) by Bryan E. Milling
* The SBA Loan Book: Get A Small Business Loan--even With Poor Credit, Weak Collateral, And No Experience by Charles H. Green
* The Insider's Guide to Small Business Loans by Dan M. Koehler

There are plenty of free informational resources out there. Check the source box for links to articles.

Hope that helps! I wish you much success & happiness in all your ventures!

Answer 3

If you are going to apply for only $15,000, some banks extend what they call "small business lines of credit" often through credit cards. Those are easier to get and can be based on your credit history alone. They typically are up to $100,000.

For example, Wachovia's has various business lines of credits http://www.wachovia.com/small_biz/page/0,,446_612_1399,00.html Their business line of credit can even be approved overnight,

However, if you're applying for a loan and if it is a big amount, banks and even the SBA may consider other factors aside from your business credit:

- A business plan explaining what the business is

- Your background and experience in the business -- in my experience, this is KEY in the eyes of the bank because they want to make sure that you know what you are doing and that you can make the business work. If you don't have any experience with the business, have someone on board that knows the business to give banks assurance that someone will guide you

- Your credit factors because it shows your dependability and how well you handle credit. They will do a credit check on you and poor credit history may be frowned upon, or even reason for the disapproval of your loan application

- Your collateral. Banks, even SBA guaranteed loans, want the borrower to show collateral. They want to be guaranteed that somewhere somehow they can get payment from you

- Condition or terms of loans. Banks would want to know three important things: "How much money are you requesting? What will it be used for? and For how long will it be needed?" Banks oftentimes prefer to approve loans for items that can be identified, has lasting value, and can be repossessed and sold if things fail.

Aside from banks I suggest you consider microloan providers. They typically fund up to $30K Read about the SBA Microloan Program http://www.sba.gov/financing/sbaloan/microloans.html and you can find SBA Accredited Microloan Providers here http://www.powerhomebiz.com/vol145/microloanproviders.htm

Answer 4

it depends on the kind of business. if it's a sole proprietorship (i.e., John Smith D/B/A Any Business) then you'll need to provide a finanical summary, and your personal credit history will be considered. partnerships are much the same. LLC's (limited liability companies) are slightly different...and corporations are way different. I'm guessing you've got a dba or partnership, in which case, your personal history will be considered along with your business's credit history.

Answer 5

Important Factors: Is your business idea sellable to the public?
What kind of competition do you have as far as is this already available?
What is the proposed location?
What kind of labor costs are you expecting?
What are the projected revenues?
What are the projected operating costs?
What kind of experience do you have personally in running this kind of operation?


There are numerous factors. If you only have a few of the angles covered, you will not get it. You have to know every aspect of your business idea. $15,000 without knowing your idea, seems very low. Banks love to lend just enough to get someone started only to foreclose on them months later. If you are preparing for day one on, you should have all operating expenses already sitting in the bank for the first 6 - 8 months. This covers all taxes, labor, rent or mortgage, utility bills, shipping and receiving, insurance, office supplies, ect. All I can say is do your homework in full. Know where every penny is going to be spent. Know your profit margin. Plan for the unexpected. Do not expect things to go right. The main thing is to beleive in yourself and beleive in your business venture. Just a hint of unsurity will send you away with nothing.

I spent 4 years with my project and have obtained over 4 million in financing from Investors with poor credit history and no money. You have to beleive in yourself and your idea. Without confidence you have nothing to offer and they will not invest in you reguardless of your past history.

Answer 6

Write an informative, concise business plan. Highlight why there is a need for your business, why you can attract business and how you will repay the loan.

Answer 7

Assets

Answer 8

Your overal plan for the company and your credit.

Answer 9

Most likely your credit history.