What do banks require in order to loan you money for a home business?
You have decided to start a home business but you are not sure about how you are going to fund the business. Unless you happen to have rich friends or relatives that will lend you the money, you will probably have to go to a bank to try to get a home business loan. If you do try to get a home business loan from a bank, there are several things that the bank will need to see.
Personal financial information-one of the most important things to the bank is finding out about you personally. They will want to look at all of your finances to determine whether or not you are a credit risk. Your credit history will come into play so try to clean up anything you can before getting to the bank. Get a copy of your credit report and look it over carefully. If there are any items on there that you need to dispute, take care of that before showing up to the bank. Your loan officer doesn't want to hear that such and such charge was a mistake. I'm sure they hear that all of the time and I'm sure that the charges are rarely mistakes. If there are mistakes, take care of them rather than try to explain them.
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You also need to take information on all of your existing accounts. If you have money in mutual funds, money markets, saving accounts, or as equity in your house, bring proof. You should be able to show the bank exactly how much money you have and exactly how much money you owe. The easier you make this process, the more likely you will be to get the loan.
Business plan-the other thing that the bank is going to want to look carefully at is your business plan. You should come with an official business plan that includes an itemized budget. If you show up with some good ideas and a few figures scratched on a piece of paper, the bank is going to send you packing. The business plan is the thing that you are trying to sell to the bank. You need to package this little baby as attractively as possible. If you don't have much business experience, it might be a good idea to get professional help for creating the business plan.
Related but separate parts of the business plan are the cash flow projections. The bank wants to know how you are going to be able to repay the loan. You need to show, for both best cases and worst cases, how much money you are going to clear and how much you will be able to payback each month. This is another area where you might need professional help.
Your game face-your appearance is going to matter more than you know. Go into the meeting with the bank thinking sales. You need to sell your business idea, sure, but you also need to sell yourself. Home business loans are more arbitrary than some other kinds of loans and you may get the loan or lose the loan based solely on what the loan officer thinks of you as a person. If you present yourself to be scattered, or unprofessional in any way you will kill your chances of getting the loan. Go in dressed professionally. Have your documents together and well organized. Speak professionally and do everything you can to present yourself as a capable professional who can be trusted.
Good luck!
