Answer These 7 Questions Before You Apply For A Loan For Your Startup

 

Securing a start-up loan can be the first crucial step towards a dream come true. But there are seven questions that every budding entrepreneur must answer before sitting down with the lender.

1. What makes this company successful?

 

What will this company do better than any other company? What is the competitive advantage that this company brings in and throws the other guys out of the saddle? Showing the lender that you have a realistic plan to get customers and market share, which in turn leads to a healthy profit, is the crucial first step.

2. Why do you need the money?

 

The loan must have a clear place in the game plan with a certain number of dollars that fills a capital gap required to purchase X and Y, which in turn is necessary to achieve Z results. If it is a machine, take a price offer.

If it is a stock, request a quote for it. The key is to show the lender that you have taken the time to investigate the real costs and you have a concrete plan to use the loan to generate a profit along the way.

3. How is the loan repaid?

 

Getting the money back, with interest, is the first and most important concern for the lender. It is therefore important to have a clear idea of ​​how the loan should be structured in order to establish timely repayments without disrupting the overall progress of the business. Loan periods are always negotiable, as long as they are set before the papers are signed.

4. Are you reliable?

4. Are you reliable?

As the company does not yet have its own track record, the lender must review the applicant’s personal history to predict the reliability of the repayment. Prepare accordingly, view credit reports from the three reporting agencies, TransUnion, Equifax and Experian, for possible inaccuracies well in advance. A single black mark can result in an otherwise excellent credit application being rejected. On the other hand, can you show a history of consistent mortgage payments and credit accounts with a good reputation? If so, use it to your advantage and ask for good interest because you are more of a “safe bet” in the eyes of the lender.

5. Do you have any collateral?

 

It may make sense to think that a $ 50,000 loan for buying a machine is so simple that the machine is its own collateral. Not so. If things go south, it is unlikely that Pamela Andrewsijk will get a full liquidation sale back the dollar-for-dollar value. Therefore, lenders generally count only a fraction of the value of the asset for collateral purposes. You may be asked to set up additional personal Andrewssijk property as collateral to bridge the gap. That is why it is good to have a written value assessment ready.

6. Do you have all the papers in order?

6. Do you have all the papers in order?

A business loan package requires a lot of documentation that goes beyond the business plan. Business permits and licenses, a franchise contract, professional accreditations, lease papers, three years of tax returns and one year of persooPamela Andrewsijke bank statements are just some of the documents that are usually required before a lender considers an application. Check the list of requirements of the lender, take the time to organize it neatly in a folder and have someone else look at the business plan and other papers to discover errors that can give an unprofessional image.

7. What happens if you die or become disabled?

 

However unpleasant the thought may be, accidents happen. It is important to know that business loans do not necessarily die with the entrepreneur when the worst happens. This means that the bank can go after the life insurance that was meant to keep the roof above the head of your family. Seek professional help from a consultant specializing in small business insurance and carefully review the family insurance situation with every ‘what-if’ scenario on the table.