Securing a loan for your small-business can be an essential element to a startup. Most individuals interested in running their own businesses don't have the necessary capital to fund their enterprise and thus look to financial institutions to help cover the costs. However, lenders can be picky and want to see that your business plan will pay off so that it's not a gamble on their end. In order to play the game and win, the small business owner must play by the bank's rules. Understanding what they're looking for is half the effort.
Lenders are risk-conscious. At the same time, no one can predict whether or not your idea is viable or if your skills are suited to your vision. What they can look at, however, is your history. Do you own a home? What does your credit record look like? Do you have experience in similar endeavors or investments or the educational background to bolster your ideas? All of these are considerations in the bank's decision as they speak to your credibility and conscientiousness in past efforts.
Outlining the exact execution of your ideas and vision is one of the best ways to demonstrate to a lender how you hope to succeed. Again, while nothing is guaranteed as far as the outcome of your small business, having clear goals and the know-how to get there is key. Ideally, your business plan will help answer questions the bank might have concerning the everyday running of the business and how that will contribute to the overall viability.
Banks are not interested in giving away money that's not accounted for. When figuring out your business plan, you are going to be outlining the everyday operation of the physical space itself as well as expected profit margins and running expenses. All of this needs to be calculated into an estimated figure with each specific cost spelled out for the bank to examine. While you are guessing as to the profitability of your endeavor, certain costs are easy to ascertain by calling the companies that would provide utilities, or looking at the cost of similar properties in the area. The number you give to the bank should be as accurate as possible. Along with this figure you will also provide a detailed breakdown of how each dollar will be spent. Basically, any expense, either property or service, needs to be accounted for and tallied in a list that equals the overall sum of the loan you're asking for.
The bank will also want to know how you plan on repaying your loan. Your best option is to be as professional as possible when providing your answer, as the bank is a lender that needs to be wooed, and not with declarations you can't fulfill. Bring in financial statements that illustrate your earning potential, and draw up some cash-flow projections that demonstrate how you intend to generate profit. Have a backup plan if nothing else.