How to get your first business loan
If you use cash or credit cards to buy what you need for your business, you might find yourself without enough money to pay for construction tools, supplies and equipment repairs, or to promote and expand your construction or general contractor business. A business loan might make it easier to get through uncertain times and grow your business.
Before you apply
To apply for a business loan, you’ll have to complete a loan application from the lender that will ask basic information about you and your business, and documents to support the application. Make sure that your application is accurate and complete. Remember that a lender will check your credit rating.
Next, create a basic business plan to support your loan application. The purpose of the plan is to convince lenders that you are a professional and are responsible with your finances. While it might seem intimidating if you haven’t done one before, a business plan can be very simple – just a few pages and a couple of documents. Your business plan should include:
- Name of your business, address, phone number and other contact information.
- A brief description of who you are, the work your company does and the reason you want to borrow.
- A history of your company – when it began, how many employees you have, the type of work you do – and a list of your current assets, such as equipment you own and the vehicle you use for work.
- How you’ve funded the business until now: credit cards, cash, small loans from your friends or family, etc. If you have any personal or business debt, include a list of your creditors, how much you owe and how much you pay each month.
- Details about your finances should be included, including how much income you need each month to break even. Attach your most recent individual tax returns as well as current receipts for business expenses.
- Explain who your clients are. Document how the service your business provides is in demand and list of recent projects. Include photos of your work and references from your customers.
- Explain how the new capital would help your small business. Be specific – tell the lender exactly what you plan to do with the money you borrow. If you plan to use the money to buy equipment or tools, include a list with the price for each. If you are waiting for outstanding payments, include a list of the money you expect and when you think you’ll be paid.
Where to apply
Now you’re ready to apply for a loan. The best lenders for small business owners are regional banks (where you do your business banking) and credit unions where you have an account. While large national banks might be less likely to provide loans to small or new businesses, it’s worth checking, especially if you have accounts with them. Lenders that know you are more likely to lend you money.
Government agencies such as the Small Business Association and other development programs offer several types of loans for small and startup businesses and may be your best option for a first-time business loan.
Small Business Association loans
Because the Small Business Association (SBA) guarantees part of what you borrow, it makes it easier for small businesses to qualify for a loan. The Guaranteed Loan Program is flexible, offers a quick, streamlined application process and is designed specifically for start-up and existing small businesses.
The Microloan Program offers small, short-term loans through qualified non-profit organizations and community development lenders. The average microloan is $13,000, with an interest rate of about 10 percent. For more information, visit www.sba.gov/category/navigation-structure/loans-grants.
–By Carlos Uribe