BUSINESS LOANS

Business loan is a bank loan granted for the use of a business. Money makes your business go. But don't try going to a bank to get it when you've just started in business.

 Banks normally make loans only to businesses with operating histories. Personal savings should be considered the primary source of funds for starting a business. If you haven't started already, start now to begin accumulating cash through personal savings.  Also, don't overlook the Small Business Administration (SBA) loan guarantee programs available for start-up businesses. With a SBA guarantee program in hand, your bank will be happy to talk with you.

Small Business Loans can be used for most business purposes: 

• The purchase of real estate to house the business
• Construction, renovation or leasehold improvements
• To purchase furniture, fixtures, machinery, or equipment
• For the flooring of inventory and for working capital

Finally, start your search for financing with a good credit rating. Most all sources of financing or credit have come to rely on a four letter word to score your credit worthiness: FICO. 

FICO: It is a numeric method, using just three digits, to predict the likelihood of your paying your credit as agreed. FICO scores range from 365 (not good) to a high of 850 (great). The score evaluates your credit payment history, number of open accounts, overall credit balances and public records such as judgments and liens. Generally, a FICO score above 680 will produce a positive response while a score below this will cause a lender to be cautious.

The Art of Getting The Money: This starts by knowing what your lender wants. A common way is to simply ask. A better way is to ask a friend or business advisor such as your CPA. 

For a business loan, the most common things are: 

• Business financial statements 
• Business tax returns 
• Business Plan with budget or projection 
• Personal financial statements  
• Personal tax returns 

DO'S:

• Live frugally and begin saving up money now to start your own business.
• Use your cash flow projection as your key tool to determine financing required. 
• Complete a business plan for meetings with potential lenders or investors. 
• Have your business plan critiqued by appropriately informed people. Revise as necessary. 
• Ask the Small Business Administration for advice. (Have your business plan with you.) 
• Maintain a current financial information packet including financial statements and recent tax returns. 
• Consider bartering services if appropriate. 
• Use your CPA or attorney as referrals to lenders. 
• Keep your lenders informed of your progress and any potentially adverse events. 
• If you need a loan for 6 months, ask for 12 months to be on the save side.

DON'TS:

• Don't expect a bank to help finance your new business. 
  Do not ask for a loan without a detailed repayment plan in hand. 
• Don't overlook vendors and landlords (for tenant improvements) as sources of financing. 
• Don't be afraid to be the bearer of bad news to your lender-get their help to make things better. 
• Don't be afraid to borrow enough to meet your realistic needs. 
• Never exaggerate. Be conservative in your presentations to lenders and investors. 
• Never write a check without adequate funds in your bank account. 
• Don't risk losing your home by taking a "Home Equity" loan unless you are certain of your ability to repay. 
• Do not sign personal guarantees unless absolutely necessary. 
• Do not budget or spend money on expensive entertaining of potential lenders.