Once upon a time, about two-three decades ago, most people were happy when they found a well-paying job that conformed to their career goals. Today, this is no longer the scene. Commuting, long office hours, stress in building career while surviving the office politics have convinced most of them to set up their own business as an alternative to the 9 to 5 job. The Internet has been an excellent tool in promoting this revolution, and this explain why everywhere you go you will find some reference to small businesses online or offline.
The key to self-sufficiency is a small business loan
If you plan to start your business, one of the most important inputs would be finance. This can be generated from your saving or by obtaining a small business loan. Contrary to common belief, applying and getting a loan is not as difficult as you would think. With the right preparation, there should be no difficulty in getting you loan approved. Here is what you would need;
- A professionally drawn business plan – this should include a lucid business profile that clearly states what your business is about. It should include a market research that proves the feasibility of your business, cash flow prediction, and collateral. The latter is important as small business is considered risky and without collateral, the loan would attract either high interest rates or rejection.
- Proper documentation – everything that you put into the business plan should be backed up by adequate documentation. Each bank and financial institution has its own application formats and requirements. Ensure that you furnish all the documentation needed. Many small business loans meet with rejection because the applications do not subscribe to the rules of the lending institution.
- Your share of capital – most banks approve of 75-85 per cent of the total amount required for the business and requires the applicant to show the remaining 15-25 per cent. Ensure that you have the cash ready.
What you should not do when applying for small business loans
- Do not use your credit cards to set up the infrastructure of your business, before you have the loan approved. In case your loan is not approved, you would be left with no business and hole into your pocket.
- Do not ignore the Government sources for grants and small business loans, even though it would mean more paper work and time invested in follow-up. Some of the best resources are offered by Government.
- Do not set out to launch your business before you worked out the source of your finance until you break even according to your business plan. Clear goals and appropriate budgeting are the main factors that contribute to small business success.
Be careful about repayment plan
You have a great business plan and you look forward to launch your business with the loan you have applied for with the banks. What about repayment? You need to work out a feasible plan about how you repay the loan obtained (1) if the business progresses as planned, (2) if the business does not progress as planned. This is also a very important aspect that the lending institution would look at while assessing the merit of the application.
Online resources:
- http://www.smallbusinessfinancetips.com – this is an excellent website, which provides a wealth of information on all aspects of the application for small business loans.
- http://www.sba.gov/services/financialassistance/index.html - this is the website of US Small Business Administration loans from where you can have first hand information about Government assistance for your small business
- This site provides details about how more and more women today are becoming small business owners, but they still face drawbacks when they are applying for loans at banks or investment centers. This site provides a new company that overcomes the disadvantages women face when applying for financial assistance as an institution.
- Tips for getting the financial assistance for startups or small businesses
