Essentials of a Small Business Loan?

Answer 1

Starting or running a small business can be a challenge especially when there are financial constraints. Therefore, many companies may require a loan to help fund the business in order to survive the rough economic climate. Getting a small business loan may be one of the best ways to help finance your business. However, in order to qualify and to successfully receive a small business loan, it is vital to understand how the loan application process works and to know the requirements or essentials that the business owner is required to meet. The essentials of a small business loan may include:

• Having some value to offer in the form of collateral, such as equipment, a vehicle or a lien on rental property.
• Providing records and documents, including personal and business financial statements and tax returns.
• Submitting a business plan outlining the purpose, revenue and expenses to support the need for the loan and to provide evidence that the loan will be repaid.
• Providing resumes and character references regarding the trustworthiness of the individuals involved in the business.
• Having a good and accurate credit report, which will strongly influence the loan approval and to present the business as a low risk.
• Being prepared to answer questions relating to the loan amount, the use of the money as well as the repayment and back up plans if the loan is denied.

Qualifying for a small business loan is usually much easier to achieve than some other types of loans. In addition, small business loans offer tremendous benefits such as lower interest rates and longer terms or time periods to repay the loan.

Funding for small business loans are available for a number of projects and businesses such as funding for start-up businesses, exporters with less than 20 employees, rural business owners, members of the military community and borrowers from distressed communities. Some types of loans may be used for specific purposes such as machinery, equipment, fixtures, supplies, working capital, purchasing an existing business and for certain forms of debt financing. Small business loans may also be available to homeowners, businesses and renters who have been affected by a declared disaster. These may include funding to replace or repair personal property, inventory and machinery.

Since lenders are mostly interested in the timely repayment of their loan, having a knowledge and understanding the essentials of securing a small business loan is very important.