When you are planning the launch of your own small business, a business loan can be a great idea. Business loans offer funds for stock, equipment and other start up costs associated with your new business, such as fit out, purchase or construction of premises or purchase of machinery.
Preparing Information For The Lender
Before you look for finance, make sure you do your homework. The lender will be impressed, and in many cases will actually require you to have a structured business model and plan. It's pointless approaching your lender with just a fuzzy outline of what you want. Remember, you are asking them to take a risk, so make sure that you have as much relevant information as possible to present to your lender.
You should prepare a detailed business plan showing how you have researched your market, what the likely demand will be for your product, what the likely threats will be and what measures you have in place to counter those threats.
You will also need to provide cash flow forecasts detailing what your projected income and expenses will be, and showing how you arrived at those forecasts. It's best to be conservative with your income projections, but to allow a little more with your projected expenses. You should provide these forecasts for years 1,2 and 3.
Remember, the better your research, the more at ease the lender will be, and the better your chances of obtaining the necessary finance.
Security For Your Loan
Loans may be available in both secured and unsecured forms, however unsecured loans are very hard to obtain, and in most cases the lender will want security by way of a mortgage over real estate. Secured loans will allow you to borrow more, and may be at a cheaper interest rate than an unsecured loan.
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