How To Secure A Bank Loan And Finance Your Business

If you are planning to start a business but you do not have enough money to raise a capital, maybe it is time for you to consider taking a bank loan.

Banks generally grant different types of loans to individuals and businesses if they can show that they can earn profit from their businesses and be able to pay their loans back. In short, the bottom line is credibility. If you have no track record to support your image or you have a bad reputation with the banks or any credit institution, it may be difficult for you to get a bank loan.

Here is a simple guideline on how to secure a bank loan to finance your business:

? Prep up your business for investment ? This applies to all businesses, whether start-ups or established ones. If you are thinking of applying for a loan, it is important to get things ready. This means you have to know that the loan is necessary for your expansion or it is needed to push your business forward. You should also be able to tell the bank how much you will need and be able to show them how the loan can help your business.

? Get the documents ready ? Part of the preparation for a bank loan includes drafting a business plan and making cash flow forecasts. You also need to research on all options for business financing that may be available to you such as small business grant, personal loans and private equity. You should be able to present to the bank your updated personal and business financial history which may include tax returns, assets and liability statement as well as credit score.

? Secure the requirements ? Before you head on to bank and file an application for a loan, you have to be able to comply with the requirements first. Some of the things needed to apply for a bank loan include the following: personal or company profile and records, financial statements, bank records, business permits and certifications, and other pertinent documents that the bank may ask you to submit.

? Decide on which type of loan you will file ? There are several types of bank loan available for an individual or business. Depending on your business needs, you have to carefully choose which type of loan is suitable for you. You can try to seek the help of a financial adviser in this. While trying to decide on which type of loan to choose, study your finances first and determine the effect of a financial support on your sales and earnings. There are two major types of loan: the flexible loans and the fixed loans. Flexible loans are ideal for business since it offer different interest rates and terms of repayment. Fixed loans, on the other hand, have stricter rules and have rigid payment schemes.

? File your loan ? Once you are in the bank and you come face to face with a bank officer, try to be honest and answer the questions truthfully. The bank basically asks three things: the amount of your loan, the length of time that you want to repay it, and the assets that you may use as collateral against your loan. Your answers to the questions will definitely affect your application as well as the rate of the interest. As a bank rule, the larger the amount of your loan, the more information you have to provide them.

? Wait for approval of your loan ? Generally it will take at least three to six months to get a bank loan approved. Getting approved for a bank loan is not easy and once you gain the confidence of the bank as lender, stick to your promises and obligations. Keep in mind that you may need a larger amount for your next loan and its approval may depend on the outcome of your present loan. In addition to this, you have to remember that your credit rating improves every time you settle a loan and this will give a good reputation among banks and other loan institutions.

Another important thing when applying for a bank loan, try to ask the bank about the total cost of the loan, which include the interest and other charges. Also, make sure to check and compare the rates of the different banks to give you an idea of what they can offer.

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About the Author:

Steven Boccone is a New York-born economist, financial analyst and manager. He has worked for various financial institutions worldwide and currently manages a US-based global marketing company. He is an art lover, a traveler, and he maintains his own business blog.

Source: http://www.howitoo.com/finance-business-legal/how-to-secure-bank-loan-finance-business?utm_source=rss&utm_medium=rss&utm_campaign=how-to-secure-bank-loan-finance-business

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