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Business Loans for Startups: How to Get Approved
By Phil Trumble
Businesses have trouble securing finance at the best of times.
Normally you have to have two years of solid financials before a money
lender like a bank will even consider lending you money. Often you
need to have a strong personal credit record to be eligible for a
decent business loan from start-up. There are other lenders that offer
business loans specifically for start-ups so the process is easier now
than it was a decade ago. However, to stand the best chance of
securing those much needed funds, follow these four steps to cement
getting approved:
Be a home-owner
As a homeowner you will already have created a history of borrowing
and are in possession of a large asset that can be used as security.
Lenders are risk conscious. Business start-ups are in a high risk
bracket. There is no way to tell if your idea will work, or you are a
good money manager or if the execution of the idea will go to planned.
They have to rely on your existing assets to pay the debt in the event
of default.
Include all your assets in your application
The level of borrowing you can secure is normally determined by the
amount of security you can place against the loan. Being a home owner
is suitable as usually that is the biggest asset a person or a family
owns. In a business, there may be more than one person applying so
each person should list their assets as security to garner the highest
loan possible.
Items that are considered assets include:
Cash
Property
Shares
Bonds
Vehicles
The higher your asset value the more money you are able to borrow. Be
careful not to over-extend yourself as you are liable to lose each
asset you use as security against your loan.
Have a good income record
Have your old tax returns on record to demonstrate that you have had a
good history of income. Even though starting a new business will
affect this, if it demonstrated that you are capable earner then it
does make the lender less cautious.
Account exactly where the business loan will be allocated
This is vitally important to getting your loan approved at the maximum
level. If the lender can see where exactly the money is going they can
ascertain if your application is viable. If you just make an
application of $50,000 with no indication of how you are going to
spend it then you may well get rejected. If you make an application
for $100,000, where the total is itemised you are likely to be
approved:
$15,000 is for premises
$50,000 is for equipment
$25,000 is for inventory
$10,000 is for staff
From this quick list, the money lender can see that if you default
they can retrieve money from equipment and inventory that will account
for 75% of the total loan as well as the security you have put up.
About the Author 180 Business Loans are an Australian business financier that provides cash flow solutions to businesses experiencing financial difficulties. You can find out more at http://www.180businessloans.com.au
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