Whether you need start-up financing for a new business, or funds to support a company already in operation, these days personal company loans can be hard to come by. Banks have tightened their belts on all forms of lending. If you're seeing for a small company loan, effect these steps:
1. Think banks and loan types carefully:
Just because big banks aren't lending doesn't mean a traditional bank loan is out of the question. Small society banks commonly did not wade into the financial quagmire that has engulfed their larger counterparts. Small, healthy banks are still lending.
Along with choosing a bank, you must choose a loan option. Not all banks offer "small company loans" specifically. Instead, you may be taking out other type of loan, such as a home equity or a personal loan, to finance your company venture. Research the key lending rates in your area, and be realistic about what you can afford.
2. Be prepared:
No matter what bank you approach, they won't just hand you a loan. Prepare the following:
- Debt-to-equity ratio: What is your business's total debt? What is its total equity (value when all debts are paid)? Be ready to illustrate your calculation and show all debts and assets.
- A down cost and/or collateral: Just like buying a house, a down cost and/or other collateral will be required to gain your small company loan.
- company plan and financial statements: This should show exactly how much money you need and exactly how it will be used. If you're a start up, your company plan will be especially important.
- Your track record: How has your company performed in the past? What's your reputation history?
3. Be realistic about costs and look for alternatives:
A traditional bank loan is going to come at a cost. From the down payment/collateral you'll commit, to the interest that will accrue, your loan business transaction will have principal costs beyond the loan principal. Are you ready to take on a high-interest personal loan, mortgage your house, or spend your savings? Can you get a best deal elsewhere?
Consider this: Many small businesses don't get their start-up capital from a bank. They get it from house or friends. Think about this lending alternative and Think the possibility of angel investors in your inner circle.
4. Do it right:
If you, like so many others, conclude to fund your speculation straight through friend and house lending, a legally recognized loan business transaction is essential.