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Five Ins and Outs of How to Apply for a Small Business Loan

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How to Get a Small Business Loan in Five Easy Steps

Congratulations! You’re getting your small business off the ground and into a bright horizon. With the resources of a small business loan, you’ll have the adequate funding to maintain a prosperous business. Whether you own a pet franchise, independent business, or are delving into a new start-up—having the financial backing helps.

This article helps summarize the process. There is a lot of paperwork involved in loan application process whether through a bank, credit union, or the SBA. Organization is crucial. You will need to clearly state why your business needs a loan and determine the amount you will need to take out.

Be prepared to answer the following questions:

  • Why are you applying for this loan?
  • How will the loan proceeds be used?
  • What assets need to be purchased, and who are your suppliers?
  • What other business debt do you have, and who are your creditors?
  • Who are the members of your management team?
  • Questions relevant to your personal background.

Organize all Required Documents

Before investing precious time and resources into the application process, first, procure all the documents you will need. This will expedite the whole process.

To start, you will need to check your personal credit and your business’s credit. An SBA 7a loan, for example, is the most common loan for small businesses. For an SBA 7a, you will need a 680+ FICO score. You will need to request a credit report from all three major credit reporting agencies like Equifax, TransUnion, or Experian.

You will also need to develop your business plan. A thoroughly prepared business plan must include a complete set of projected financial statements, including profit and loss, cash flow, and a balance sheet. You will also need to submit personal and business income tax returns from the three previous years.

Some lenders also require business owners to submit legal documents depending on the nature of your business. Be prepared to submit business licenses and registrations, article of incorporation, copies of third party contracts, franchise agreements, and commercial leases.

Review Your Lending Options

For small business loans, there are a variety of lending institutions to peruse through for financing. Do some comparison shopping. Different lenders have different criteria points, interest rates, and financing.

You can choose to apply at a national commercial bank or smaller regional bank. Often small businesses have an easier time getting approved by smaller regional commercial banks. Credit unions are also an option, but you will need to be a member. If this is the case, speak with a loan officer at your local credit union about assessing your business for a small business loan.

There are also state and local economic development agencies that specialize in advancing entrepreneurialism. Non-profit organizations can provide lower interest rates than large banks, or are more willing to aid with small business owners who do not qualify for traditional commercial loans.

Prepare and Polish Your Business Plan

Once you have all the documentation, preparing your business plan will be more streamlined. A business plan is a living document that projects three to five years ahead—configuring how the business will grow revenues via your intended plan of action.

You will need to the following:

  • Projected financial statements
  • Profit and Loss statements
  • Cash flow
  • Balance sheet

From these documents develop your business plan. Use the following checklist to make sure you have included every provisional detail.

Executive Summary

This section describes your business. It should include a mission statement, founding, growth highlights, products and/or services, glimpse of financial information, and a summation of future plans for the next 5 years.

Start-ups and new businesses should treat an executive summary like a pitch. Show you have done the market research,  include your own experience, market gaps, and your vision.

Company Description

The company description expounds on the executive summary. It should include details on your business’s marketplace, an explanation of your products and/or services, analysis of consumers, and competitive advantages your business possesses.

Market Analysis

This segment segues from your company description. A market analysis provides more detail into your market knowledge. This is where you will present research findings applicable to your business.

Include:

  • Industry description
  • Target Market and Evaluation
  • Size of Market
  • Market Share Gains
  • Competitive Analysis
  • Regulatory Restrictions

Be thorough. To avoid penetrating questions during your presentation to lenders, answer them all here with a prepared course of action.

Organization & Management

What does your team look like? This section outlines your company’s organization structure, details of ownership, profiles your management team, and qualifications of a board of directors.

Service & Product Line

The emphasis in this description should be on the benefits of your potential consumers and retained customers. Focus on what your business provides that will target customers. Details about product’s life cycle, intellectual property, and all research and development should be included.

Marketing & Sales

How are you planning on driving sales and retaining customers? A comprehensive marketing strategy blueprints growth strategies, distribution, and communication to customers.

Funding Request

This includes your needs for your present request, and for the future. This section shows your intention with a loan and strategic plans for the future.

Whatever you plan on doing with your small business loan—list that here.

Financial Projections

With clear objectives, describe where you believe the financial state of your company will be going forward. Include data from the last five years. If you have not been in business this long, provide prospective financial data.

Visit Local SCORE & SBDC Offices for Guidance

Speaking with experienced executives and business experts will help ease and answer any unknowns you might have before presenting to a lending organization on your personal financing situation. Local Small Business Development Centers, or SBDCs, are part of the small business administration. Many local chapters are on nearby university campuses. You can also explore non-profit SCORE centers which offer free business mentoring from retired executives. If there are no local centers near you, information and advice are offered online.

Think of these aids as continued networking. Establishing a relationship with your local chapters opens the doors to enriching insights from small business owners who have the expertise for success.

Build Your presentation and Make Your Appointment

Once you have determined you are eligible, found a financially beneficial lending organization, and constructed your business plan, it is time to apply.

Take a proactive approach toward the application process. You will want to craft an articulate professional package with a succinct method of delivery. Data should be concise. Deliver summative information in the form of spreadsheets, charts, and graphs to quickly demonstrate your plans and knowledge to the loan officer.

From here you make an appointment and request enough time to present with visual aids. You can use large print-outs, PowerPoints, and props if necessary. If you have done your homework, this should be the easiest step. A presentation will only be as good as the preparation.

Good luck, and for more information small business loans, visit the SBA website.

 

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The Big Six of Running a Small Business

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Are you Ready to Start Running a Small Business?

Expanding your horizon and leaping into your entrepreneurial dreams can be one of the most liberating and difficult things one can do in a lifetime. We are conditioned to believe that stability comes in the form of a traditional career path. College, interview, office job, and a 401(k). However, many of the entrepreneurs holding positions at multinational corporations started out running a small business. Big ideas start in small places. Apple, Hewlett-Packard, Mantel, Disney, Amazon, and Google are invariable major players in the business the world. 

Another thing these companies all have in common is they started in a garage. Now, we’re not saying that quitting your job this second and finding a new place to park your car is the best way to start running a small business. The lesson entrepreneurs should take away from icons like Zuckerberg or Larry Page is that rags to riches is possible with the right variables. These variables are not an inherent thing some are blessed to be born with, while others miss out. The derivation of success is a combination of passion, tenacity, and vision.

Opening a startup, buying a franchise, and running a small business take these same three variables. Like any situation in business, without having a systematic method to determine your success, leaves things up to chance. Business isn’t a gamble.

Business is a calculated risk.

Read further to study how adopting tactics and business philosophies can help attain huge personal successes while running a small business.

1. Honing Your Vision

Proverbially, courage is 50 percent fear. Making a courageous decision in business means believing in your ideas and goals but also being savvy enough to know the risks. Believing in your idea is the belief in yourself. An entrepreneur can have what seems like a full-proof business model, to begin running a small business, but fail to execute if they don’t believe wholeheartedly that they can handle the pressure.

Visualize yourself running a small business. What does this look like? Are you running a startup software development firm? Are you working alongside animals in the pet industry?

What makes you happy?

Knowing what to expect can help channel inhibitions into actions. Once you find an industry, market niche, or concept that you are passionate about, this will help you with the initial configuration you need delineate before starting up.

2. Research & Data

Before you can begin running a small business, you need to know the ins-and-outs of the industry you choose. This means homework! Business success is contingent on writing a pristine business plan. The process of writing out a business plan forces you to organize your thoughts and imagine unforeseen possibilities. This will also come in handy if you need to pitch your small business to a loan agency or find a partnership.

Points to Include in a Strong Business Plan:

  • Industry Analysis
  • Customer Demographics
  • Demand & Needs
  • Business Model
  • Overview of Competition
  • Risks
  • Implementation Plan
  • Financial Projection
  • Financial Needs

Compiling the data and key metrics surrounding your small business is the difference between failure and readiness. Remember, your goals should more than financial profit. Goals should encompass the why of business.

3. Getting Started

Fear is paralyzing. The best way to prevent getting inhibited by fear is doing the research to know what you’re up against. Still, many continue to make excuses on why they shouldn’t get started. “It’s not the right time.” “I’m just too busy.” “I need to think about it more.”

Stop. When you justify fear, you become your own Achilles heel.

Admittedly it is hard to gauge when the right time to open is. Sometimes it’s a gut feeling, other times, seismic shifts in our lives tell us it’s time. Reliance on these situations works but also keep in the mind the timeliness of the market. An advantageous moment in the marketplace might be the best signaling that it’s time to get your operation running. For instance, if your vendors operate seasonally and are running discounts or there is high demand for your service or product, this might be your moment. Running a small business is a constant finger on the pulse to keep overhead low. Lack of cash flow is one of the biggest causes of failure, so look for strategic opportunities to get started or expand.

4. Find the Right Support

Surrounding yourself with the right people from the bottom to the top increases your chances of prevailing in the business world. Finding a mentor, attending conventions & networking, or even buying a franchise are routes to getting the training and support you will need to adequately run a small business.

Visiting your local SCORE (Service Corps of Retired Executives) chapter, a resource partner of the Small Business Administration can help pair you with a mentor. Retired executives have an abundance of rich information to help steer your business. Subscribing to literature—business magazines like Forbes or Entrepreneur can also help you enter the dialogue of your industry. Buying a franchise is one the safest routes. A franchisor will train you and your team with proven methods for success.

Hiring the right people is also vital. Make sure the people you choose to employ are on board with your vision. Equally important, is that they possess the competent skills to be able to perform their job duties and help brainstorm around issues that will inevitably arise.

5. Kneading Out the Issues

Ask anyone running a small business, the notion of smooth sailing is a myth. Problems will arise. When they do, it’s important to be prepared for them and to act decisively. Consider this: you open a retail store in a high visibility area. A year into opening, a major construction project begins blocking access to your new store and cuts off foot traffic. Your sales start to plummet. How do you work around this?

  • What about competition?
  • Do you have the resources to begin scaling?
  • What is securing your products or services?
  • What makes your business unique?
  • Have you had a successful local marketing campaign?

Many issues are preventable. The key to working around these problems is foreseeing them and having a contingency plan. If you have your pathways mapped out it’s easier to steer around dead ends. Even unpreventable situations can be planned for. If construction begins on the street in the front of your store, this is the best time to get your e-store up and running.

6. Discipline & Accountability

Taking your entrepreneurial vision and transforming that idea into a functioning and profitable business takes discipline. Losing focus or momentum can be another huge inhibition. One of the strongest gym franchises—Anytime Fitness—stayed true to their roots and the outcome was favorable. By focusing on what they were good at, the gym franchise grew hugely. The same is true for Splash and Dash Groomerie & Boutique. Finding a market niche in a growing industry propelled the pet franchise company forward. Focusing on what works can take a company far.

Discipline works harmoniously with accountability. Make yourself accountable to your team, your customers, but most importantly yourself.

 

We at Splash and Dash Groomerie & Boutique wish you the best of luck running your small business! For more information on tips for success click here.

 

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