Starting a small business is not an easy thing to do for many reasons, and one of the major difficulties for lots of small business owners is getting the appropriate funding. The 2016 Kauffman Index of Startup Activity is a comprehensive indicator of latest business creation in the US and demonstrates start-up activity continues to gain momentum in 2016, following the growing trend that commenced out in 2015.
To sum up, the most recent slump is behind us, the recently developed new business activity continues to grow and these new undertakings require business funding. Your bank can be a great resource to help you finalize your business plan and strategy, and also help you get the money you require. Here are the three main things banks want to see when making loan decisions.
1) A Comprehensive, Reasonable, Business Plan
A business marketing plan or strategy is an important part of a business owner’s lending request, and the banking institutions will need to see a well-deliberated, comprehensive business plan for the production, operation and success of the small business.
A comprehensive industry analysis is required to find out if a potential business is in the swing of things with the requirements of the area and in case there is adequate market shares available to be profitable.
The small business marketing strategy and plan should include a complete market analysis of prospective customers and their spending habits. Plus, who’re your rivals in the market and what is your business’ point of difference that will allow you to be competitive?
2) Realistic Financial Projections
Realistic financial projections are an essential factor that banking institutions will evaluate closely. Your business’ financial projections should not be overstated beyond business standards. Banks will identify this stretching of the financials without difficulty, and would wish to see that you are realistic about the time and dedication required to develop a business.
The good way to start is to evaluate the industry customs and make out how your business would compare to the recent overall performance of companies previously in operation. Over and above the profits and loss projections, banking institutions will need to see a plan for predicted business cash flow, as everyone know that timing and delays play an important role in organizing and managing the finances of a business.
Financial establishments may also wish that you list a less important source of repayment when your business does struggle financially. Banks must protect their assets with every loan, so collateral, proof of savings, or a guarantor will strengthen your loan request.
3) Stakeholders And Business Resources
When a business plan is under evaluation, proof that the business owner has stakeholders who understand the business, and resources to direct them, is really advantageous. Giving the lender your business partner’s profile and management team will help him to understand that your business is in safe hands of expert people can also be an advantage.
Small business owners have to understand their industry, craft a comprehensive plan for accomplishing their objectives, summarize the business financial plan for success and have a team of experts to make it all happen.