The Federal Reserve is urging banks to increase lending to small businesses to spur on the economy. Since the beginning of the recession (has it been 3 years already!?!) banks have been reluctant to lend. That's understandable, but the Fed thinks it's time for them to lighten up already.
According to MSNBC's "Bottom Line," the Fed has been working with banks, holding training sessions to help them identify good business borrowers and to encourage the banks to offer more loans to small businesses. This may be the time to brush off that business loan proposal and start taking it to banks. But before you do that, review these key steps to a successful business loan proposal:
Step 2: Prepare a business plan. It doesn't have to be fancy or 100 pages long, but almost every bank will want to see some kind of plan that details:
- How much you want
- How you will spend the money, and
- How you plan to pay back the loan
Step 3: Prepare for Questions about Credit, Collateral, and Capital
To get a loan, especially if it's for starting a business, you will need to be able to answer questions about the down payment you will provide and where you will get this money. If you don't have enough, you will need to find a co-signer with assets to pledge. Assume you will have to contribute at least 20% and figure out where this money will come from before you start talking to banks.
Step 4: Include Personal Information
Even if you want a loan for an ongoing business, you'll need to include personal information in your proposal. That means a recent credit check (with FICO score), a personal balance sheet with your net worth, and a personal budget showing how much you need to take from the business for personal expenses.
Step 5: Gather Information for the Loan Application
At some point early in the discussion, you will be asked to complete an application form. Being ready with all the details (account numbers, phone numbers, etc.) will help speed the process and impress your potential lender.
While I can't guarantee that all this preparation will give you the loan, it will show lenders you are serious and professional.
Read more details about the Key Planning Steps to a Successful Business Loan Proposal
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