Business Loans for Start-Ups:
How to Get Approved
by Phil
Trumble
Businesses have trouble securing financing at the best of times. Normally you
have to have two to three 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 homeowner
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 homeowner 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 overextend 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
is 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 itemized 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.
180 Business Loans is 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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