Raising capital can be a big part of business planning and execution, but it’s often one of the most difficult hurdles to clear because banks and other financial institutions are hesitant to lend money to businesses that don’t have an established history of success. This can especially be true if you’re just starting out or if your business isn’t as profitable as it needs to be yet. Here are five tips that can help you get the capital you need to start or grow your business in today’s economy.
#1. Check with Small Business Administration
The first step in getting a business loan is to check with the Small Business Administration (SBA). The SBA is a government agency that provides loans to small businesses. They offer two main types of loans: 7(a) and 504. The 7(a) loan is the most common type of SBA loan and can be used for a variety of purposes, such as working capital, equipment, or real estate. The 504 loan is specifically for the purchase of fixed assets, such as real estate or machinery.
#2. Talk to Family and Friends
One of the best places to start when looking for a business loan is with family and friends. They are typically more willing to help you out financially than a bank or other lending institution. When approaching them for a loan, be sure to have a well-thought-out business plan that outlines your idea, how much money you need, and how you will repay the loan. Also, be prepared to answer any questions they may have about your business.
#3. Check Your Credit Report
Checking your credit report is one of the first steps you should take when applying for a business loan. Your credit score is a key factor in determining whether or not you’ll be approved for financing, and it’s important to know where you stand before you begin the application process. Keep in mind that if you’ve been turned down for financing from a bank in the past year, your chances of being approved again are slim.
#4. Search Online for Loans
The internet has revolutionized the process of finding and applying for loans. You can now search online for lenders and compare rates and terms in minutes. Plus, many online lenders offer pre-qualification, which can give you an idea of how much you can borrow before you even apply.
#5. Formulate Your Pitch
You’ll need to have a solid business plan and pitch in order to get a business loan from most lenders. Be sure to include what the loan will be used for, how much you’re requesting, and when you can repay the loan. You should also be prepared to answer questions about your business, such as its revenue streams and overhead costs.
