Funding for a start-up business – what are the main conditions for obtaining a small business loan?

Funding for a start-up business – what are the main conditions for obtaining a small business loan?

Before looking for money to finance a small business, it is necessary to know what a small business is. The significance of this will depend on the location or scope of the small business. In most cases, the number of staff a business has is what will be used to draw the line between small and large businesses. For example, a small business will employ no more than one hundred employees in the United States and no more than fifty in Europe.

There are so many reasons why as a small business owner you will want more finance. You may want to build the business, make some important acquisition for the business, or even buy off your debts. There are so many options for financing this type of business, but the most preferred source should be the use of loans from banks. Access to loans will be easily obtained by those firms that have a good reputation in the market than by the small or new ones that are just entering the market.

You will first need to submit an application to the bank and it will include the following:

A brief record of the business’s activities and any information indicating its likely expansion;

Who are the owners and their position in the business;

Loan guarantee;

Current financial condition of the business;

Declaration on the method of repayment of the loan;

Why is a business brief required?

This is always necessary for the banker to make sure that the bank is not only aware of where it is putting its money, but is also sure that it is lending to a business that has the potential to grow. Remember that it is always necessary to take reasonable steps to ensure that the loan will be repaid on time.

The business must also demonstrate some experience in managing finances. This will be related to the expertise that the owners or staff of the business possess. Note that there should always be an indication that the loan will be administered in the most appropriate manner.

The application must have a guarantee:

There is no way a loan will be granted to a business that has no collateral to cover the loan. Remember that the bank will need something to hold in the event of default on the loan. Loan collateral can take many forms, but banks are more interested in collateral that consists of fixed assets.

A statement of how the loan will be repaid must be included:

Any lender will want to know how you plan to pay the loan. Make sure you provide evidence of this. You can use your income or even your personal finances to prove this. In some cases, a refinancing option can also be used. Most likely, the income from the business should be able to cover the loan.

You should always know that the probability of getting a loan will not be the same for every lender. But if you have everything you need to get a loan, you should be sure that it will be given to you.

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