So many people have excellent ideas for starting their own business, and you may very well be one of those people. But most of the time, the problem many entrepreneurs run into when trying to start their business is that they just don’t have the money.
Getting small business loans is not easy – I am just going to tell you that up front. If you don’t have a large amount of funding yourself, a successful track record in the field of your business, good credit, and a top-notch business plan, you are really going to find getting small business loans difficult.
OK – so enough with the bad news! Let’s get to the good news of some simple steps you can take to greatly increase your chances of receiving that small business loan.
Create an Amazing Business Plan
Your business plan is the first impression lenders will have of you and your business idea. Your business plan is basically your resume or application for money. The more thoroughly you have thought out your business and explained it in your plan, the better chance you have of receiving the loan you want.
Now we won’t go into a lot of detail about what all is needed in a business plan because the subject is too large, but here are some highlights.
1. Executive Summary – this is a high-level overview of your business. The executive summary lets the lender know what your business is and where you plan to take it. Notice the keyword ‘plan.’ This isn’t just where you ‘want’ to take your business, but where you ‘plan’ to take your business.
The rest of your business plan is proving that you have a plan, explaining that plan, and convincing the lender your plan will work.
2. Market Analysis – this is where your knowledge and experience in your industry will come in. In this section, you have to describe the industry, its current growth, challenges, and expectations. You have to describe your target market, how you plan to reach that market, and the results of any market tests.
You also need to analyze your competition, their advantages, and how you plan to overcome their advantages. Finally, if there are any regulations, patents, or laws that you have to deal with, those will need to be described in detail.
OK – so as you can see, there is a lot that goes into writing a business plan. What I have mentioned so far is probably around 25% of what is required.
But don’t give up just yet. While you are going to have to put a large amount of effort into your business plan, there are ways to speed up the process – you can hire a consultant, you can buy business plan templates, or you can even purchase business plan software to give you a head start.