Finding the right business idea is the single most important
thing in building a successful business; raising capital is the second most
important if you must nurture the idea of growth. While the sources of capital
still remain largely the same - as they were in the last 2 decades, certain
factors must be considered by entrepreneurs looking to raise capital through
loans.
Firm up your business plan
No doubt, as an entrepreneur, you have a business plan that
serves as a compass for your business. Nonetheless, if you're at the precipice
of obtaining a business loan to advance the successful running of your
business, it's important that you firm up your business plan, as potential
lenders will scrutinize every single element contained in the plan. You might
likely jeopardize your only chance of raising capital if there are avoidable
loopholes in the plan. A potential lender will be keenly interested in
knowing that you are running a credible business and that you have the
knowledge and skill-sets required to grow it into something great. Include
absolutely everything that has to do with your business, such as goals,
competitors, past and projected revenue and expenses, market analysis, and how
you intend to grow your company. This will be the first thing they read, and it
could be the last if they are not immediately interested.
Research your borrowing options
There are a whole lot of options for loans today. You have the
banks, online loan lending platforms and companies offering loans to
entrepreneurs.
Prepare financial statements
You will want to include any past financial statement you can
provide for the lenders and future projections. Come up with a plan that you
will follow, and show projected numbers so that your lenders can see your goals
clearly and know that you will be able to make enough money to pay them back.
Include your cash flow statements, income statements, and balance statements
for the past three to five years, and show your estimates for these statements
for the next few years, taking into account all seasonal changes in your
business and how you will use the money you are borrowing.
Know your capacity for collateral
Certain types of loans will require you to put down some form of
collateral. If this is the type of loan you choose, you will need to have a
good idea of how much your form of collateral is worth. Lenders will want to
know this number and you will want to know that you have something of tangible
value to secure the loan. Just make sure that you're not going to default on
the loan and lose whatever property you use.
Understand what the loan will cost you in the end
You will want to know exactly how long it will take you to pay
off your loan. Find out what kinds of offers various lenders will be able to
give you, and use those interest rates and fees to estimate your payments. All
of this information should be included in your financial statements, but you
should also add up all of your payments to see how much the loan will cost you.
Know all of the terms and conditions attached to each loan offer before you
decide which one will be best for you, and be able to show the lenders that you
are a good investment.
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