How To Get Your Business Loan Approved With This Simple Business Plan Guide
Access to funding can be one of the biggest barriers to entering the market, especially for female business owners and entrepreneurs. This is because there are still major inequities between funding for male and female-owned companies.
However, this doesn’t mean that you shouldn’t try and secure the necessary funds to get your startup off the ground or inject extra capital into your existing business. It just means that you need to be adequately prepared when approaching a financial institution or lender for an all-important loan.
Part of being prepared is having a watertight business plan. Regardless of what your business entails, this document needs to illustrate why it’s viable and sustainable. Female entrepreneurs may have to work harder to secure funding and face more obstacles, but if your business plan includes the following, your chances of securing a loan should improve:
Why You’re A Solid Bet
A lender isn’t just looking at the business you’re trying to fund. They’re also looking at the person behind the concept. You need to be a solid bet to make the business work and pay back the loan.
One of the most frustrating things that a female business owner will likely face is the fact that men are generally taken more seriously. This means that you have to be completely on point with your application. It’s essential that you take the time to show off your experience and work history and highlight any success stories from your business life.
You need to emphasize your professional standing and why you’re the person to make this business a success.
If you’re teaming up with a partner, have several associates, or already have management staff appointed, include their biographies too. They’re as much a part of building the business as you are and can go a long way towards ensuring you look like a solid investment.
A Detailed Budget
The first aspect any reputable lender will address is your current financial position. In an already established business, you need to illustrate your expenses, income, and profits in detail. In a startup that’s relatively new or hasn’t begun operations yet, it’s a bit trickier to show this information.
This is where a good budget will come in. You can estimate expenses and expected profits based on market research and your understanding of the business you want to launch. Your estimates should be as realistic as possible and based on extrapolations from actual research. You don’t want to apply for a loan based on assumptions that are made with rose-tinted glasses on.
A balance sheet showing assets and liabilities will help the lender understand the level of risk you present. In a startup, you may need to indicate expected assets and liabilities based on your research and business needs.
A Clean Credit Report
No one is going to lend you money if either you or your business have a bad credit score and report. It doesn’t matter how good the business idea is; you need to prove that you’re financially savvy and know how to pay back credit timeously.
There are several nasty clichés around women being bad with credit cards and overspending on a regular basis. It’s unfortunate, but you’ll be fighting against these stereotypes when you apply for a loan for your business.
This is why it’s essential to gain access to your credit report and see what it says. If it is less than favorable, you can apply to have any errors fixed, which will raise your score. You will also have a good idea of what’s going on in your report and can answer any questions or concerns a lender may pose.
A good score and clean credit record are often the deciding factors not just for securing a loan, but for how much credit will be extended.
A Clear Intention For The Money
You’re far more likely to successfully secure a loan and a reasonable interest rate if you have a clear plan for what you will be doing with the money. Since it’s a business loan, you don’t generally have to state exactly what the money’s for, nor do you usually have to use it for any specific purpose that you put in your application. However, it’s best to outline your intentions in your business plan.
You should state the goals for the company – both long term and short. You need to layout how you plan to reach those goals in actionable details too. This will include the capital you need to buy inventory or equipment, hire the right personnel, or rent office space.
Take the time to break down how you will use the loan and how it will help you reach each goal. You can create income projections based on what you can do with the funds and outline how they will potentially boost profits.
Research has confirmed that women tend to be more risk-averse than men, and when drawing up financial projections, this is a positive attribute. Erring on the side of caution is far more attractive to a lender than over-inflated figures or predictions based on a large percentage of risk.
Additionally, providing clear, accurate, and concise information will impress the lender and make them more inclined to give you the required amount.
All The Lender’s Requirements
Each lending organization will have a setlist of paperwork requirements. Ensure you do your research and have a checklist for each application you submit. If you can make your loan application as easy for them to read as possible, you’ll be doing everything you can to fight potential discrimination due to your gender.
The key is to tailor your application to each lender. You may find that two institutions have the same required paperwork but name their documents differently. Take the time to rename your documents to their naming conventions. It’ll help you to look reliable, professional, and in control.
Before you submit your application, run through your checklist to make sure each item is included and named correctly. Then, add a well-written, clearly laid out cover letter that introduces who you are and what your business is all about. The idea is to show the lender that you can stand on your own two feet but would greatly appreciate their help.
Don’t Be Afraid To Fight
Securing a loan for your company can set you on the road to success. For women, financing opportunities may be fewer, but this just makes it more challenging to conquer. By following this advice and creating a solid, well planned, prepared business plan, you’ll be setting yourself up for success. And remember, it’s not impossible to get that loan – women own 36% of the small businesses in the USA, and that number is constantly growing.