Applying for a Loan: Do's and Don'ts
Small business loans are a great way to help finance your initial start-up costs including items such as equipment for your business. For instance, let's say you have a great idea for a cycling gym, but don't have the initial capital to buy the spin bikes. You can apply for a business loan to cover those essential equipment costs.
If this is your first time applying for a business loan, there is some important preparation you can do ahead of time to make the process go as smoothly as possible. Proper financial planning will be the key to your success. While this article can't provide a guarantee that you will get approved, coming to the initial meeting with the lender armed with knowledge will help you feel more confident and show you've done your homework.
- DO prepare carefully prior to applying for a loan. First impressions count! If a lender believes you have done a thorough job in presenting your request for a loan, it is more likely to have confidence in your management abilities and your company.
- DO dress and act professionally when you meet with the lender.
- DO compare terms, conditions, and rates when shopping for a loan -- they can vary dramatically from lender to lender. Shop for a loan the same way you would shop for any other product or service. Look for the best deal for your company.
- DO know how much money you are requesting and how your company proposes to pay it back.
- DO have your company's financial documents and business plan available for the lender at your first meeting. The lender will be able to begin reviewing your request immediately.
- DO know what collateral you have available. Ask yourself what assets can you use as collateral? Learn their market value and what portions you can use as collateral in the future.
- DO check with your attorney before you sign any loan documents. He or she can explain the legal consequences of each document to you before you are legally obligated.
- DON'T ask a lender "how much" money your company will qualify for. If you don't know how much money you need and how your company is going to repay the money, the lender will not be favorably impressed!
- DON'T meet with your lender if you do not have your company's financial documents available. If you tell your lender that "the accountant hasn't prepared them yet," the lender will realize that you don't know the financial condition of your company.
- DON'T overestimate your financial worth and income.
- DON'T show up at your meeting with the lender in sweats or torn or dirty clothes, even if you have just "come from work." If you don't take the time and energy to put your best foot forward, the lender will not have.
Need a Lawyer?
You may want to consult with a lawyer before or during the loan application process to help you better understand your legal obligations before you sign on the dotted line for your business loan. Contact an experienced business law attorney today to learn more.