Building a business costs money—usually more than you can generate from your operating revenues alone. Securing the funds you need will require careful planning and preparation.
Whether you’re a fully operating business looking to add a new truck to your fleet or build a new location, or if you're just starting out, you’ll need money to turn your plans into reality. It might help to work with an accountant to calculate estimated costs for reaching the next level of development.
Before you borrow, list your basic business expenses. Each time you expand your business, these costs are likely to increase:
- Employee salaries
- Electricity, heating, air conditioning, and fuel
- Paper and other office supplies
- Purchasing or leasing operating equipment
- Decorating or remodeling costs
- Legal and professional fees
- Machinery and power tools
Give Yourself Some Credit
Do You Qualify?
If you’re thinking about taking a loan to build your business, there are several qualifications that banks and investors normally expect from you, as the owner, and your business. Before you apply for a loan, make sure that you can provide potential lenders with the following:
- Business plan
- Balance sheet and income statement
- Cash flow projections
- Profit and loss reports
- Personal financial statements for all business partners
- Credit report
- Personal income tax returns
- Information on business debts
Getting the Loan
You may want to investigate banks that have a history of offering loans to small and growing businesses, since they may be more familiar with your situation and easier to work with.
All potential lenders will probably ask how much you are investing personally in your business venture.
Potential lenders will probably ask how much you are investing personally in your business venture. Among other things, it’s a way to assess your commitment to the business.
A Little Help
Since 1993, the Small Business Administration (SBA) has extended Microloans to businesses to help finance machinery, office space leases, equipment, and other basic necessities.
The most you can borrow with a Microloan is $50,000, and the average amount that borrowers use is about $13,000. Although the term of the loan depends on the size of the loan and what you’re using the funds for, the longest term for a Microloan is six years.
The SBA can also help you create a loan package and secure funds through a program called Lender Match. You can qualify for the loan if your business qualifies based on SBA standards.
For more information, go to SBA.gov.
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