Many people dream of opening their own business and being their own boss. In fact, thousands of people do just that every day. Many small businesses can be opened with little or no up-front money, and those businesses can thrive just as well as businesses that need considerable starting capital. However, at some point, almost every business will consider borrowing money for one reason or another. You may need to contemplate a business loan for additional equipment, or to expand into another building or city, or you may just need to cover a temporary seasonal downturn. Whatever reason you have for looking into a business loan, there are several factors to consider before you go to the bank.
Are You In a Position to Borrow?
One of the first things that you must look at honestly is whether or not your business is in a position to take out a business loan. While a good credit rating is important, banks also look at other information when considering a request for a business loan. If your business is established, the bank will require documentation of a steady income and proof that the business is able to afford the costs and repayment terms associated with the loan. If it is a new business, the bank will need to see a quality business plan that explains what you anticipate revenue to be over a long period of time. Before approaching the bank, look honestly at the business revenue and expenditures to ensure that your company is in a good position to borrow.
Can I Manage My Cash Flow?
One of the most important things to develop in any business is an effective bookkeeping system that is clearly organized. This system can be handwritten or computerized, but any bank is going to want to see reports of income and expenditures for the business. Few banks will extend business loans if you cannot provide them with a clear profit and loss statement; a box full of receipts and cancelled checks is probably not going to be sufficient for the bank to believe you are managing your cash flow well.
What Are My Growth Prospects?
When deciding if it is time to take out a business loan, it is important to look to the future before approaching the bank. One of the best reasons for a bank to lend is if you can document growth prospects in written form. By looking toward the future, you will have a better chance of proving to the bank that your company is growing and that a business loan would be an investment in the community that could create jobs and contribute to economic vitality.
Obtaining a business loan is often more difficult than obtaining loans for personal reasons, such as homes and cars, but by properly preparing in advance of your visit to the bank, you can improve the chances that the bank will be willing to take a risk on your growing business. For more information on business loans, visit www.independent-bank.com.