The strength and speed a plane takes off with is the one that sustains its momentum in the air. When diving in any business, you need to have a good take off speed in terms of finances and great business idea.
Startup business loan is a major catalyst of enabling your business to be off the ground. But what do you need to obtain these loans? And perhaps which are some of the documents you need when looking for funding? This article will help you understand these critical questions. Let’s get started!
The Requirements of Getting a Startup Business Loan
Now that you are done with your business plan, the next thing is sourcing for funding from well-known financial institutions, friends and families, donors, government or other sources. What do they require from you?
- A good credit score – this is always a determining factor of whether you have a loan or not. When you have 680+ in your score, then you are safe.
- Tangible Duration of operation – you need to be in operation for at least 6 months. Nevertheless, if you have a great business plan, you may get startup loans without hassles.
- Collateral – in case you fail to pay the loan due to the collapse of the business, they need something to hold on. Such loans that are collateral based have low-interest rates.
- Your cash flow – if your business has a great income and cash flow, the lender gains confidence that you will repay the loan.
- Your credit status – don’t have so many debts from various institutions if you want to have startup loans.
What About the Documents Needed?
Some of the common documents that many lenders require from you include:
- Business Registration documents
- Federal Tax Identification Number (EIN)
- Articles of Incorporation
- Bank Statements
- Financial Projections
- Approved Purchase orders
- Balance sheets
- Business plan
- Profit and Loss Statements
- Personal financial statements
Depending on the startup loans funding source you are going for, the documents may vary.
Do’s and Don’ts
When dealing with any lender keep your chances high of qualifying for funding. Consider the following to up your game:
- Do have a business plan – this will be important before and after obtaining your startup loans. Before getting the loan, a detailed business plan will make your lenders see you as a visionary entrepreneur. After getting your loan, it will guide you on how much money to put where.
- Do inject your own personal savings – the lender wants to see you are confident in whatever business you want to fund. You can be asking for funding yet you fear putting your money in it.
- Don’t bite something bigger than what your mouth can chew – that should tell you not to borrow much than your capability to pay.
- Don’t be too optimistic – don’t only see the success and the good side of your business, focus also on your weakness and bad side with an aim of improving them.
- Don’t be disorganized – whether when appearing before the lenders or when operating your business.
- Do seek professional advice – no matter how ready you feel for business, you need to show your lender that you have sought some guidance and advice from experts.
When looking for sources of your business startup loans, don’t forget to show that lender your other sources of capital. This will make the lender to view you as a very proactive entrepreneur and perhaps give you the loan. Now you know.