Starting a business venture is a dream of many usually due to misconceptions about not adhering to strict time constraints and not answering to a boss. However, not everyone can go through all the complexities of starting a business and it usually consumes more time than a normal job with your customers taking the place of a boss. The most important question you usually ask in the beginning is about the basic requirements to be eligible for business loans and how and where can one get the same for starting a business.
The first requirement is that you have a business plan, which enumerates all pertinent details about the business you propose to start. Basically, you must convince the lender that the business will be able to generate enough money for their investment to be safe, meaning that you will make the repayments on time. The business plan must demonstrate complete knowledge about the intricacies of the business, exactly how much money is required for starting the business, where and how the loan amount will be utilized, and how you propose to run the business so that the loan can be repaid on time. The business plan must be convincing enough for the lender to feel secure about their investment.
An important aspect of eligibility for a loan is to show the lender your financial participation in the business project. The lender will be motivated to grant a loan if they find your hard-earned money is involved in the project and as such you will leave no stone unturned in making the project a big success. You must exhibit your personal credit history to prove your creditworthiness. It is essential to demonstrate how your education, experience, expertise, management skills, and aspirations will help you in running the business successfully. Moreover, your attitude should reflect your confidence that even if one lender declines your request, you will be able to convince others about the viability of the project.
In order to be prepared to meet the lenders you should have all documents pertaining to your business proposal ready with you. These should include the business plan, cash flow projections, statements of your financial status, past business performance reports, tax returns and a credit rating report. There are many sources available on the inter-net to help you prepare the required documents.
5 Cs Of Credit
You must convince the lender that you fulfill the basic requirements of any loan, which is the 5 Cs of credit. These are the character, that signifies your trustworthiness, the capacity, which ensures that the business will be able to generate enough money to be able to repay the loan on time, the collateral, which is what you can offer as security for the loan, the conditions, which necessitate that you will be able to fulfill all your obligations even in the face of external adverse circumstances and the capital, which demonstrates how much you can invest from your own savings and resources.
David Gass is President of Business Credit Services, Inc. His company publishes afree weekly e-newsletter on Small Business Consulting at their web site http://www.smallbusinessconsulting.com