If you’re thinking of taking the plunge and starting your own business, you’ll need to apply for a business loan. But what are the best ways to get one? This article will help you find the answer about getting new business loan.
With this blog post, we’ll take you through each of the important steps that you may encounter when applying for a new business loan. Specifically, we’ll cover how to write an application, how much funding options range from. Also, we’ll cover what factors lead lenders to invest in your startup. Throughout these steps and more, this blog post will guide you through every step of getting an idea down on paper. Or into code before it can become a finished product that eventually helps make whole profit for its owners.
Step-by-step Guide on getting a new business loan
- First and foremost, you’ll need to sit down and have a think about what you want to achieve with your new business. Now, for this blog post, we’ll stick with startups. It is because these are logical business ventures that any motivated person can often achieve. But for bigger businesses, the demands of finding a new location or securing a bank loan can be even tougher. That said, there are still many people who have found success in doing so. The main point is that you need to honestly assess what your goals are. After all, the more involved you are in developing your own idea, the better it will be, even if your business isn’t successful at first try.
- Second, you’ll need to find out whether or not you’re eligible for a business loan. To do this, and to test your idea before investing a significant chunk of your own money, we recommend that you apply for a business grant. The application process is very quick and straightforward. And it often provides you with all the resources you need to start.
- Following on from this, it’s time to start fleshing out all of the details of your new business idea. You’ll need to know how much funding it will require, where it will come from and what you will need by way of collateral in order for your own bank to approve the funds.
- Once you’ve completed that, you’ll need to study the lending landscape in your own area. That way, you’ll know what you’re up against and what kind of interest rates are typically offered. Also, this research will help clarify which business loan options are available and how much funding is required for different kinds of startups and businesses.
- Once all of you have done this, it’s time to have a think about the details. For instance, if you’re needing a new business loan in order to buy land or property for your business, you need to factor this as well into your application along with any other fixed costs associated with your new venture.
Now, you’ll need to write your application.
But what information do you need to include?
Here’s a breakdown:
- What you’re going to use the money for. In this case the new business loan is for the purchase of land and a building that will be used for the start-up business.
- How much funding will be required – What are the startup costs for this new business? They are £100,000 in total but $80,000 of this will be from an existing personal balance on a credit card and therefore not as secure as funding via a bank loan or BTL loan.
- What is the collateral for this loan? The property is mortgaged so the only collateral available is the business itself. The risk is that we cannot own the business until we have paid back all of our capital plus interest in full.
- A brief overview of what we are planning to use the funding for, outline how much time has been spent on it and that it has been costed with the help of a professional accountant and has been approved by a panel of investors in order to show that you have tried everything before investing your own money into it.
- Who are you? This can be a personal form of loan as it will not be assigned out to the general public and your details will not be passed on to any other person or business.
What to to after you have written application?
Once you have finished writing this application, you will need to upload it into your chosen bank’s online loan system. Make sure that you answer all the questions fully and completely, otherwise they will not approve your request. Also, don’t forget that a new business loan doesn’t necessarily need to be a high-value one because these won’t apply for small businesses and startups as much as they would for larger companies.
If you’re happy that you’ve answered all of the required questions adequately and have addressed all the potential concerns that your lender could have, it’s time to get out their for a face-to-face meeting. This is important because your application may be rejected if the lender or investor see any errors in it. So make sure you spend time with them discussing those details and explaining anything that they may not have understood. If they don’t want your business, then they’ll need to say so and explain why this is so.
Also Read: Startup Loan for Business
When should/shouldn’t you get a business loan?
You should get business loan if:
- You have a good business plan: The first thing you need to do before applying for a bank loan is to sit down and produce your business plan. Your goal here is to show the bank that you know what you’re doing and are able to repay the loan.
- You have the money to pay back: You need collateral when you apply for a business loan so make sure that you can afford it.
- You have the motivation and determination to pay back the loan: Yes, that’s right. If you don’t want it bad enough, then they most likely won’t ever approve your request. That said, if you’re being honest with yourself and have a well-thought out plan to make your business work, then there’s every chance that it will.
- You have tried everything else: You need to be realistic about what you can get from different businesses and investors. If at first you don’t succeed with one kind of loan or business deal, then it’s worth trying something else in order to get closer to your goal.
- You have good credit: If you think you won’t be able to pay back a loan then they don’t want to know. So, if you do have some good credit and it’s not being used for any other kind of business, then this could be a great option.
- You’re not eligible for one of the other ones: It’s also worth noting that there are lots of different types of new business loans available, ranging from interest-only payment plans to fixed rate repayments to BTL loans which can be used for property investment and even business equity loans. So make sure you check whether or not your application has been declined before you give up on the idea.
You shouldn’t get a business loan if:
- You can’t explain why you need it: If you can’t convince them why you need the money, then they won’t want to give it to you. Remember though, if your business plan is good, then this shouldn’t be a problem.
- You don’t have collateral: You need to have something as surety against this loan. In most cases, this is your house or commercial property but if you do have something else, then it’s worth giving it a try.
- Your application has been declined several times: If you’ve tried and tried to apply for a business loan without any success, then there might be another option. Consider alternatives such as equity loans or tools like crowdfunding which could be an answer to your prayers instead of getting a bank loan.
Always remember that if you can find the right kind of business loan, and have a clear, straightforward plan, then there’s every chance that this could be your key to success.