It's all about the money. There's no amount of emotion, no amount of moxie or anything else you can show a lender that will convince them to give you money unless you can first prove your business fundability. That's the bottom line and here's how you do that.
Providing the Perfect Plan
Every business needs a business plan. It's amazing how often people jump into a start up without creating one. A business plan is your road map to a successful business. It keeps you from going in too many directions and helps you plan and prepare for expenses. Without it you can easily find yourself drifting around and never making a profit. .
Your business plan will do one more thing. It will show lenders that you have a good grasp of what it will take to make a profit. It will show them how and when you'll begin to have the money to pay back your loan, and exactly how much money you'll need to get there. In a nutshell, it will prove your business "viability." This is different from business fundability. Unless you have already been in business and have income as well as a good track record of paying your expenses on time, your business plan just shows reasonable expectation.
Who are You and What do You Bring to the Table?
For startups, a business loan is a big risk. If you have past experience running a successful business, that is a huge plus. That doesn't mean, however, that you won't be eligible for business funding if you have never had your own business before. It does mean you'll have to prove your knowledge and ability more when you are a beginner.
Be prepared to show a lender that you have the knowledge needed. Have you spoken with a qualified consultant? Do you have educational background that gives you a business background? Do you have an associate(s), relative(s) or other persons you will be working with that have a business background? Any of these qualifications should be accounted for in your business plan to give backers a clear understanding of your abilities.
Bet Your Bank on It
New businesses may not have a buildup of business credit, but they can have a bank rating. It is easy to get a bank rating and is a must before you apply for a loan whether you are just starting up or have been in business for years. Open a bank account. Keep it in good standing and use it. A stagnant account may be in "good standing" but it won't be adding to your bank score. You have to keep the account active. Make deposits, pay your business related bills and show that you are responsible in handling your company's funds.
How to Increase Your Credit Score
The best thing you can do for your business is build a good business credit score. You don't need a loan to do that. You can get started right at the beginning by opening vendor accounts with the businesses you use most often.
Having a vendor account is like having a mini loan. It can give you the power to get started easier. You can get supplies and pay for them within the demanded payment period. If you are just starting out and income is spotty, it might be in your best interest to look for net90 vendor accounts. That means you have 90 days from the date of the original purchase to make the payment.
Always be careful to not spend more than you can reasonably pay if your business income isn't what you expected during that period. The most important thing is to pay on time whether your vendor account is net30, net60 or net 90. Your business credit will increase rapidly and give you increased ability to add to your credit by opening business credit cards in your company's name. If you already have all of these things, you are in great shape to walk into a lender's office. If you do not, take those steps to create strong business fundability.
What Else You Need to Prove
When you apply for business funding you are going to have to prove your business actually exists. No, the lender will not just take your word for it. In fact, not even having income will actually prove your business is a legal entity. You will have to be ready to produce proper licensing and physical address and contact information. If your particular business has associations that you can join, do it. That helps show your business community involvement and also bolsters your company's credibility.
Being prepared and walking in to your lender's office with the proper information in hand, and proof of your business fundability is the best way to get approved. You look professional and show you have the knowledge to make it work. Lenders are only interested in two things: do you or will you have the money to repay the loan, and do you have the desire and ability to do so. Prove both counts on the first visit and you'll be on the fast track.
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Corey Pierce is CIO & CTO of CredSystems LLC which has developed http://www.BusinessFundability.com. In cooperation with Experian Business Information Services BusinessFundability.com provides business owners with a free test that allows them to see what any potential lender will see about the fundability of their business and then provides real world answers regarding what to do to increase their fundability.
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