How Should Apply for Small Business Loans the Right Way

An idea is all it takes to start a small business, but that’s only if you turn that idea into a plan and execute it properly. For many entrepreneurial spirits, their dreams start by securing a loan to get them off the ground.

Securing a loan is a planning process that takes hard work and dedication, but once it’s all said and done, your preparation will help you secure the funding you need. Let’s take a look at the right way to apply for small business loans.

Have a Brand

Your idea needs a brand identity to back it in today’s competitive market. You should make a name that is meaningful, relatable, or clever, and develop a few logo ideas that really display your brand message.

Speaking of brand message, you will want to develop this alongside the logos and color scheme. Developing a mission statement and establishing your company values is a great way to help your brand develop quickly, and down the line, it can help you make important business decisions.

Creating a direct and impactful brand will help your potential lender see the value in your idea they way you do.

Provide Detailed Product Sheets

Another way to establish your brand value is by providing a detailed breakdown of your products, services, or solutions. These breakdowns need to induce cost of goods sold, employee wages per item, and your retail pricing plan.

Try to make a sheets that break down your first 5 years of business. They say you will know if a business will stick around by their ability to make it to year 5, so plan for it.

Provide In-Depth Payment Plan

The thing about loans and business that most people forget is you aren’t technically profitable until that loan is repaid and you are sustaining growth. This is why you made those 5 years of cost analysis sheets.

Using those sheets, you should develop a payment plan for repaying the loan money you used plus the agreed interest terms. By showing your ability to budget your loan payments, operations costs, and employee pay on paper, you automatically help your potential lender see your ability to put it into practice.

One last note before you move on. Don’t set up all of your numbers on your ideal customers per day. Instead, find a number above and below your ideal customer turnover ratio, so you can get a range. You want to plan for the worst and hope for the best, and it’s important to know your operating floor, especially should times turn tough.

Show Your Marketing Strategy

If you have take the time to develop a marketing strategy, which you should, include it in your application documentation. Set up your ideal customer, create your social media strategy, and show everyone your knowhow with an amazing blog schedule.

Frameworks are a great way to show how you are attacking your market and gets your lender into your strategies for impacting the market. I’m sure they have seen a number of strategies over the years, so they will know when they see a scaleable and sustainable plan.

Provide an Exit Strategy

No matter how long your plan ends up being, make sure it includes an exit strategy. No one wants to fail, but success is never guaranteed. With that being said, I again stress planning for the worst and hoping for the best.

It’s always good to take a realistic approach to your business because you are sure to run into unforeseen bumps, even if you create a "perfect plan." In other words, no plan will every be perfect.

Apply Within Your Credit Score

When you fill out your application, make sure you apply for the appropriate loan. You want your loan to be impactful, but you don’t want payments to stretch you thin. If you need to build credit, you should start with smaller loans with lower credit requirements. Maybe look into sba loans or credit lines as a way to build credit and get approved.

No matter what you end up applying for, make sure you are prepared, and always shop around for the best offer. You never know who will say yes when you are armed with a in-depth plan.

Plan for the Worst and Hope for the Best

It takes time and patience to create an in-depth business plan, but the rewards of its creation will set you up for success. By taking the time to compile your thoughts into a directed business plan, you can show lenders your business chops, and that’s good for your approval potential.

If you are unsure of what type of loan you really need, creating this plan is the best way to start talking with lenders. They can go over your plan with you step by step and direct you to the right loan for your business.

How do you prepare your loan applications? Have you ever been denied for a loan? Have you ever been approved for a loan? Share your comments and tips to help new entrepreneurial spirits get approved for their business loans.

Larissa James is a passionate blogger and traveller. She loves sharing knowledge and opinion.