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Details key to getting business loan

It never is easy to ask someone for money, even a loan. For the owner of a business start-up, however, it likely is essential.

When approaching a bank for a loan to start a business, meticulous planning and a well-considered presentation might make the difference in walking away with entrepreneurial success or rejection. Prospective business owners must sell themselves as well as the business concept, and an expert in start-ups says the key is adding a summary of the business and the person running it to any required loan applications could prove crucial.

The expert also offers the following tips:

  • On this supplementary document, briefly explain the nuts and bolts of the business, such as the market for the goods or service, how it differs from competitors and why this business will succeed. Keep it short and explain it in easy language that a busy banker won't have to waste time deciphering.
  • Ask for a specific amount of money and outline where it will go in terms of equipment, advertising, facility costs and a fund to meet payroll while the business launches. Attach any documentation and budgets.
  • Specify a repayment plan. Detail estimates of revenues and expenses, then show how that will translate to loan repayment. The bank leaders who approve loans want to make sure the borrower can make timely repayments.
  • Show how the loan can be paid back if the estimates of revenue and expenses prove wrong. Will the business owner put up collateral or another loan guarantee, or is there a backing from a government grant?
  • Give the bank résumés and professional backgrounds of the people who will be running the business. Bank leaders need to know their money will be put in the hands of a team well suited to execute the business plan.

Before finalizing paperwork with the bank, it would be a smart idea to have an attorney or other business professional review the proposal to make sure it addresses all issues.

Source: Inc., "How to Ask Your Bank for Money," Tom Searcy, May 22, 2012

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