How to Get a Business Loan in Five Steps
Need funds to startup or expand your business? Follow these steps:
A lender looks at a loan request in three sections known as the "three C's". They are:
- Credit. Did you pay previous lenders back as contracted?
- Capacity: Can you afford to pay back this loan?
- Collateral: If you don't pay back the loan from what asset can the lender recover their principal?
Step one is:
1. Identify your strength and weaknesses in the "3 C's". Do this as would a lender - with a very critical eye. Identify your loan to value ratio and your debt service coverage ratio. If you have reason to believe that you credit is less than sterling, get a copy of your credit report including your credit score
Each lender has different criteria with the cost of the loan being higher as your strength in the "3 C's" is lower. Step two is:
2. Identify lenders who lend to your level of borrower and to your industry type. Call lenders to get their criteria. Learn about the SBA 504 program and 7A loan guarantees. Find who others in your industry have used for financing.
If there is a gap (not a canyon, just a gap) between your borrowing ability and lenders criteria, a loan broker may be able to help. They spend their working hours finding second and third tier (more aggressive and more expensive) lenders and establishing relationships with them. They can act as a salesperson for your project in ways that you as a principal cannot. Step three:
3. If you cannot find lenders on your own, consider hiring a commercial mortgage broker. Be careful - in many areas there is little or no protection under the law for commercial transactions. While a small upfront fee for out of pocket expenses is reasonable, shy away from any that want large upfront payments. If they can do the deal they will be paid very well at settlement. If they can't do the deal they shouldn't be taking your business at all.
Once you identify a list of potential lenders or hire a broker, get prepared. Do not think that the business loan process is merely a matter or forms and paperwork. While there is more paperwork than you'd ever want to see, it is more of an inquisition. Step four:
4. Be an expert salesperson for your project. Obviously, we think that your should use FundablePlans.com to build a written proposal. Whatever method you use, know your numbers and be able to defend them. Understand your market and be able to speak competently about it. Know your competition. Most importantly, (from step one) know your strengths and weaknesses as a borrower and be able to maximize the strengths and minimize the weaknesses.
If you are successful with steps one through four, you will expect to "hit a home run". You may, but most likely you won't. Step five:
5. Don't give up. Where one lender might have too many loans of your type in her portfolio, the next may need exactly your loan to meet his goals (loan officers are paid to lend). This is not to say that you should "beat a dead horse", but if you have a viable project, a good presentation and good "C's", you will be able to get financing.
Good luck with your project, if you have questions about funding feel free to use the e-mail link below.
About The Author
Dave Miller is a business consultant and the creator of FundablePlans.com, an online business plan builder at http://www.fundableplans.com, dave@fundableplans.xom
Latest News
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FDIC's Bair warns investors fighting loan changes The Associated Press - WASHINGTON (AP) — Investors in mortgage securities who are challenging home loan modification programs aimed at avoiding foreclosures could provoke a ... FDIC: Government idea won't help people in need FDIC Chairman Bair Defends Community Reinvestment Act Before ... Community lending program not cause of US woe-FDIC |
 New York Daily News | Stocks Down As Automakers Seek Loans Forbes, NY - General Motors (nyse: GM - news - people ), Ford Motor (nyse: F - news - people ) and Chrysler have requested up to $34 billion in bridge loans and other ... Chrysler Asks For $7 Billion In Loans By End Of The Year Big Three executives make their pitch to senators for bailout loans That $25 Billion in Loans America’s “Big Three” Automakers Had ... |
 Washington Post | Japan suspends soft loans for Vietnam The Associated Press - HANOI, Vietnam (AP) — Japan has frozen low-interest loans to Vietnam until it takes "meaningful" steps to eliminate corruption in public works programs, ... Vietnam aid loans suspended Japan suspends ODA projects in Vietnam Vietnam honours every penny of ODA: PM |
 RGE Monitor | Fed Extends Three Emergency Loan Programs to April (Update2) Bloomberg - 2 (Bloomberg) -- The Federal Reserve extended the term of three emergency-loan programs to April 30 from January 30, aligning their expiration dates with ... FACTBOX-The Fed's evolving liquidity toolkit Fed Extends 3 Emergency Loan Programs Fed extends expiration date on 3 lending facilities |
 New Zealand Herald | UAW willing to bend as auto chiefs push for loans MarketWatch - By Shawn Langlois, MarketWatch SAN FRANCISCO (MarketWatch) -- United Auto Workers President Ron Gettelfinger said Wednesday that the union is willing to ... Video: UAW Offers Help To Big Three Ford, GM and Chrysler go back to Congress for bailout loans In bid for loans, Detroit auto makers outline plans for drastic ... |
 Javno.hr | US interbank lending rates drop for third day The Associated Press - LONDON (AP) — Interest rates on three-month dollar loans between banks fell for the third day running Thursday, while the equivalent European rates also ... Global interest rate cuts to spearhead crisis fightback Interest rate cuts to spearhead crisis fightback Euribor rates extend falls, 3-mth hits 2-yr low |
 AFP | Brazil's Petrobras secures loans totaling $900 mln Reuters - N: Quote, Profile, Research, Stock Buzz) said on Thursday it secured three loans in the last month totaling $900 million, the latest in a flurry of recent ... Brazil stocks gain, currency lower on global doubts |
Countrywide refunds $11.5M to NC consumers Bizjournals.com, NC - The NCCOB began an investigation of Countrywide Home Loans and Countrywide Mortgage Ventures in 2007. Examiners identified violations of North Carolina’s ... Countrywide to refund $11.5M to NC borrowers Countrywide to make $11.5 million in NC refunds Countrywide Agrees To Refund $11M To NC Borrowers |
 Reuters | Auto execs set to make pitches for loans Detroit Free Press, United States - Yet GM's plan for the $18 billion in loans resembles the steps it would take in bankruptcy in several key aspects. The company expects the union to take ... Bill to Speed Loans Appears to Be Auto Makers' Top Prospect Congress briefed by auto companies on revamp plans UPDATE: ‘BIG THREE’ REQUEST FOR BILLIONS IN LOANS AND CREDIT |
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