Whether you want to kick-start a new business or expand an existing one, a small-business loan could make the difference between realizing a dream and coming to a standstill.
With so many loan options for current and potential business owners, getting started may seem overwhelming. But with some research and preparation, applying and getting approved for a small-business loan doesn’t have to be complicated.
A great place to start looking is at a local community bank, where loan officers more commonly interact with the underwriters and can closely review each loan application on a case-by-case basis.
Many banks also offer loans backed by the U.S. Small Business Administration (SBA). Not only does the agency offer its own loan and grant programs, it also provides an array of materials to prepare you for your new venture — from tips for creating a business plan to discussion boards on filing taxes.
Whichever way you go, the next step is to gather the required documents before initiating an application. These vary for different lenders, but you will typically need to present your current resume and personal financial statement, bank statements, a business plan, projection of income and expenses, personal and business tax returns and – most importantly – a detailed plan for repayment; be prepared to outline your collateral (i.e. real estate and/or savings) as well.
Lenders will evaluate that information, along with other factors, to decide if it’s safe to lend to your business; It’s important that you outline the need for the funds and your ability to repay.
Once you have filled out your application, double-check it for errors and omitted sections, and ensure that all required forms are completed. Upon submitting your application, it’s a good idea to stay in touch with your lender and respond quickly if more information is requested.
It may take anywhere from five to ten business days to receive an answer, depending on the size and type of loan. If your application is declined, your lender can advise you on areas that need improvement before you reapply. If you’re approved, make sure you understand all the terms before signing on the dotted line.
Overall, it’s important to do your homework and find a loan that works best for your particular business. Being prepared will not only speed up the process, it will also improve your odds of getting approved. While the entire process will take some time, the end results can be well worth the wait.
Michael Drapeau is Rabobank, N.A. Vice President and Branch Manager in Murrieta. Rabobank, N.A. has nearly 120 retail branches in California, including Murrieta. Rabobank, N.A. is an Equal Housing Lender. www.rabobankamerica.com