Most startups are funded by personal savings, but if you need additional capital for your business, you may want to consider a business loan. The financing you receive from a loan can help you with start-up costs, launch a new marketing campaign, hire new employees, or expand into a new market. Loans can be obtained from a variety of lenders, including your local bank, peer-to-peer lending sites, or microlenders.

You can find more information about the lenders and the different types of loans available in MOBI's module on financing your business.
To get a business loan, follow these 6 steps:

1. Put your documents in order

Every lender requires some paperwork to get started. For a business loan leads, the most common things lenders require are:

Business financial statements

Business tax returns

Business plan with budget projection.

Personal financial statements

Personal tax return

To prepare for your meeting, ask a trusted business advisor, such as your CPA, what documents lenders typically need to approve a loan for a business like yours. You can also call the bank or organization ahead of time to ask. When you meet with your lender, check what documents they need, make sure yours are complete and send them in right away.

2. Present yourself professionally


When meeting with lenders, make sure you are well dressed and looking good. When talking about your business, be clear, specific, and realistic about your goals and what you need the money for. The worst thing you can do is give the impression that it is more "bloated" than "substance."


The best way to meet a lender is through a referral. Ask your CPA, attorney, or friend to introduce you to a lender to get you off to a good start.



3. Be prepared to answer questions about your business


When you meet with a lender to raise funds for your business, you should comfortably discuss your business plan, past financial performance, and financial projections. Familiarize yourself with this information in advance, so that you can speak with confidence and clarity. You may want to bring your accountant if you need help.

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4. Know why you need the money


"I just need the money" does not inspire confidence or that you have thought it through. Do you need the money for the team? Sales and marketing efforts? Employee recruitment? Review your business plan, make a list of your startup expenses, and determine how much money you will need. Be prepared to give your lender an overview of these expenses. As a startup, don't plan on spending money on expensive entertainment. Your lenders will be more interested in how your money is being used to grow your business.

5. Be prepared to talk about your personal finances.


Virtually all lenders will do personal savings and corporate credit checks. Be prepared to discuss any past credit problems or problems.

6. Propose a payment plan

Most places have some flexibility with their repayment plans, and if you propose your own terms, your lender may appreciate that you are thinking about how to pay them back rather than just figuring out how to get the money.

One type of repayment plan is a line of credit, which allows you to borrow money as you need it, as long as it does not exceed the maximum amount. The advantage of borrowing a line of credit is that you only have to pay interest on the amount you borrow, and you can pay it at your own discretion. The downside is that most lines of credit are subject to annual renewal, and if your lender decides not to renew the loan, you will have to pay it back in full at that time.

You can also propose a term loan, which is for a specific amount and is paid on a specific payment schedule. Interest can be variable or fixed, and most term loans are repaid within 1 to 10 years.

Additional tips:


Consider using your vendors and vendors as sources of funding. For example, if you need an illuminated sign for your store, the company you contract with to make the sign may provide financing so that you can make monthly payments instead of paying cash.

Try bartering as a way to finance your business. For example, your ads in the local newspaper could be paid for the bagels you make.

After you get the money


Getting the money is just the first step. You should strive to be a good customer for your lender to work with you if you need help later. Here are some tips to make sure you keep up with your lender:

Comply with your agreement. Make sure you understand the requirements of your loan and adhere to them as much as possible.

Provide your lender with regular financial statements and other required documents on time.
Be proactive. Contact your lender if there is a problem, such as not being able to make the loan payment on time. Keep them informed about the status of your business, whether you have good news or bad.

The more prepared you are, the more likely you are to be approved for a business loan and achieve your business goals. Complete Section 4 of the MOBI Business Plan Template (Financing) to clarify how much money you will need to borrow, how you will pay your lenders, and where you will apply for a loan. For more help starting and expanding your business, enroll in MOBI's online courses, and earn your certificate today.