Secure a small business loan successfully with these 9 essential steps. Get the funding your business needs to thrive.

Securing Small Business Loans: 9 Essential Steps for Success

If you want a small business loan, you need to fit into the ways that the lender is asking. Some lenders want their borrowers to be less risky, so their terms are tighter. Either way, who succeeds and who gets turned down boils down to you getting the right information to the right person, in the right way.

Crafting a Compelling Loan Application

If you want to make your chances much higher of getting a funding application accepted, you need to pay careful attention to these core elements:

  1. Defining the Loan Purpose

Lenders will want an explanation that makes sense for your business type– paint a complete picture of all the different things the loan amount could help fund.

  1. Precise Loan Amount and Repayment Terms

Outline exactly how much money they will need, plus a clear schedule of repayment – say, $10,000 over 5 years, monthly payments.

  1. Demonstrating Repayment Strategy

Explain how the repayment will happen. Demonstrate how the loan will have an impact on increased profits or decreased operating costs – for example, ‘by increased profits generated by Whizzbang Go4It’s simplified operations’.

  1. Pledged Collateral

Confidence-building collateral is important. Let the lender know that what you are offering is secure. If you won’t trust your security, why should they trust you?

  1. Comprehensive Business Plan

The business plan is the most important document, which helps to answer the main questions: how well can you manage a business, and how well do you understand the market you are going to enter. It can tell us what the business does and how it does it.

  1. Robust 3-Year Financial Statements

The best foundation for a funding application is perfect financial data from your accounting software, at the very least backed up by an accountant or tax advisor.

  1. Up-to-Date Management Accounts

Newer pictures of cash flow – drawn directly from your accounting software – give you far better insight, in real time, into your business’s fiscal pulse.

  1. Ageing Reports: Receivables and Payables

Adding sufficiently detailed debtors’ (accounts receivables) and creditors’ (accounts payables) ageing reports will add another layer of transparency to your financial profile.

  1. Principals' Financial Statements

If collateral is required, principals’ balance sheets are very important, showing the financial soundness of the principals.

Tailoring the Approach for New Ventures

For new businesses, the key becomes the strength of the business plan and the security (collateral) provided to hedge risk.

The Art of Presentation

Learn to make a compelling case to the lender. Write a good story and practice it over and over with coworkers and family – so good that they want to invest in you or give you a loan. Role-play with a partner who plays the part of the lender and ask you pointed questions. Spend enough time practicing – but don’t over practice.

The approval of your small business loan is dependent upon the careful assembly of a dossier significant enough to sway the lender. Every element, from the purpose of the loan and the way in which it proposes to be repaid to the business and personal financial accounts of the principals along with the security held against the debt, plays a crucial part of the funding jigsaw. Through careful research and preparation, you can prove yourself completely ready for the challenge, armed with a compelling story that convinces the lender to get on board. Whether you’re pursuing a loan from an informal lender, a bank or elsewhere, a new way of approaching your application can make all the difference.

 Other topics that may interest you:

Questions and Answers:

Why are accounts payable procedures crucial for a business?

Organizations use accounts payable procedures to oversee the accounts payable operation, ensure that payments to vendors are transparent, and avoid errors when settling invoices.

What is the significance of eliminating paper in accounts payable processes?

Getting rid of paper simplifies a business process and eliminates costs and inefficiencies. Using online paperless invoicing, supplier self-service on the web and automated workflows can reduce information paper handling costs by 90 per cent.

How can Enterprise Resource Planning (ERP) systems benefit accounts payable?

ERP systems automate purchasing and payables activities, doing more with less. Group purchasing organizations can save $9 an hour in time for in-house staff with annual sales over $100 million by using an electronic invoice matching application. Savings of $300 per million in sales annually can be achieved with this type of technology.

Why is negotiating payment terms important in accounts payable?

Asking for terms on receipt of goods or invoice receipt can essentially buy you a week or more, and use up less cash and affect credit lines less.

What's the advantage of taking payment discounts in accounts payable?

That 2%/10 net 30 discount effectively equates to an 18 per cent return on capital. You will make almost 18 per cent over 30 days if you pay before the discount.

How can businesses enhance accounts payable accuracy?

Use procedures to control errors, such as overpayments, false payments and late payments, and to reduce them; be mindful of efficiency; and establish regular audits.

How does training accounts payable staff impact effectiveness?

Regular formal training gives staff knowledge of fraud prevention, negotiation skills and the economics of payables, enabling them to work more effectively and efficiently.

What's the takeaway from integrating these strategies?

Using these measures leads to more accurate, efficient and streamlined accounts payable so that your business is healthier overall when it comes to your finances.