Your First Business Loan – 7 Important Things To Know
Budding entrepreneurs need more than just inspiration, drive or hard work to make it in their very first business. Money plays a vital role! In this regard, knowledge on getting a business loan is everything, especially if you’re in on this route for the first time.
Once you think you’re all set, it’s easy to have expectations on getting loan approval. Many first-time entrepreneurs running small-scale businesses tend to think that with the economy gradually recovering and financial institutions showing eagerness to assist business owners, the entire process will be a breeze. Reality tells us that it isn’t always the case, especially if the presentation of your business plan and financial projections aren’t well structured or presented compellingly.
Business News Daily details three significant points on how it should be done, citing inputs from expert advice from Holly Nicholas Signorelli, a certified financial planner and CPA speaking from her 20-year industry experience:
1. Do create a real budget.
Banks and investors don’t want to buy your idea; they want to make a profit. With very few exceptions, they are not going to invest in your idea if it doesn’t make sense, or if it feels too good to be true.
2. Do have budget references.
“Real figures, real research — get down and dirty on it,” Signorelli said. You need to back up why the customers would come to you versus the competition. You want details, but you want them to be short and concise.
3. Don’t overestimate your income.
The lack of income in the first year is what causes 80 percent of small businesses to go out of business.”
4. Don’t underestimate your expenses.
There are things that you underestimated, no matter how meticulous you were, and there are things that you forgot altogether. Just like income, you need to go back to your budget and take your expenses and increase them by 25 to 50 percent.
5. Do have extra funds.
As a small business owner, it’s critical that you have enough savings, to make sure you can pay your bills during the first year.
6. Don’t stress about finances.
With the right budget, you will get the right amount of money from the right investor, giving you the freedom and confidence to focus on your dream and make it happen.
7. Do learn from your mistakes.
“I worked for a great CPA right out of college for five years to learn all I needed to know to run a business,” Signorelli said. “I still made mistakes in the first few years, but the foundation had been set and above all else, it was not an option for it not to succeed.”
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