If you want to be your own boss, starting a business is an excellent way to begin. Most people don't have a lot of extra capital lying around their house, which means they'll need to rely on loans at some point. Loans can give you the money you need to get your business to a stable, sustainable, and profitable place. However, you will need to do a few things before you can get a small business loan. Here are four steps every new entrepreneur should take:
1. Start your business.
If it's possible to start your business using resources you already have, you should do that. Lenders are more likely to grant small business loans to business owners who have already demonstrated an ability to run a business. Lenders want to know that you'll be able to repay their loan. If your business is already generating income and has a track record of profitability, that will look very good on your loan application. Don't be afraid to start small.
2. Double check your application.
In order to receive a business loan, you will need to submit an application to a lending institution. Make sure there are no clerical errors or inaccuracies on your application. An application that contains the wrong information or one that's filled out incorrectly can be immediately rejected. You don't want to wait for a decision only to find out you've been declined for a careless mistake. Ask a trusted mentor or colleague to look at your application before you submit it; a second pair of eyes can be incredibly helpful.
3. Update your business plan.
Your business plan is not a static document. It should change and grow as your business does. Make sure you're keeping your business plan up to date. Your business plan is the document that will inform lenders about the goals and plans you have for your business. It should contain accurate projections of future profit, and it should outline your business's budget. Your business plan will give potential lenders a good idea of what you intend to do with any loan you receive.
4. Build up your credit history.
If you're working on your first business, lenders will likely look at your personal credit history to get an idea of how you handle money. If your credit score isn't great, work on it before applying for a loan. Take out a secure credit card and use it to pay for your everyday purchases. As long as you pay your bill on time and avoid spending money you don't have, this can be a fast and efficient way to build credit.