Completing your business plan is just the start to seeking financing for your business. Your complete business plan lays out:
- What your business is/does
- What service or product you offer
- How much you will charge for your service or product
- How much money you will make from your service or product
- How much money you will need to start up so that you can put your plan into action
If you are anything like me, you think or thought "now that my business plan is complete, I am ready to submit it to banks and get a loan." This is what most new business owners tend to think.. Unfortunately, it is not that easy to get funding. If it were, every small business owner would be running to the bank for a loan. Along with a solid business plan and loan application, you must have other things. The bank is a business and they will not buy into a (your) dream with the "hope" that you will make money and be able to pay them back, therefore your business plan alone will not get you funding. The three major things, in addition to your business plan, that the banks look at are: personal creditworthiness, collateral and presentation.
Personal Creditworthiness
Aside from your business plan, banks and investors look at your personal creditworthiness before deciding to lend you money. Yes, your own credit plays a huge part in a bank approving or denying you a loan! If you can't manage your personal finances, how will you be able to manage business finances? When applying for a loan, having good to excellent personal credit is important. If you are looking to get a bank loan to start your business and your credit is not what it should be, work on cleaning up your credit before applying for a loan.
Collateral
When asking for financial help to start your business, collateral is important. Nobody will give money to someone who has nothing to lose. Most banks require you to make some type of investment into your own business. Putting valuable equipment, land or real estate that you may own up for collateral shows a lending institution that you believe in your business enough that you are willing to invest your personal assets. In reality, it makes sense. Are you willing to loan someone money who may or may not have the means to pay you back? Would you be more willing to loan that same person money if they gave you the title to their car until they paid you back? It is easier to loan money to someone who has a vested interest in the loan as opposed to someone who has nothing invested.
Presentation
Presentation is EVERYTHING! I am sure that you have heard this many times before. Well, it is true! People believe what they see. If you want your business, business plan and loan application to be taken serious, then you have to present all three in a professional manner. Make sure that when you are submitting any documents, that they are legible, neat and clean. Your business plan should be printed on high quality paper and professionally bound. If you hire a service to complete your business plan, make sure that it will be delivered to you in this manner. Lastly, when you go into the bank to handle any type of business, but namely requesting and/or submitting your loan application, make sure that YOU look the part! Your are a reflection of your business and your business is a reflection of you. Be dressed appropriately and professionally.
Aside from a well written business plan, we have to remember that potential investors, banks and other lending institutions are looking at us. We ARE our business so we have to make sure that we are in order not only professionally but personally.
As always, if you have a specific question or topic that you would like addressed, please email kimestrykoaching@yahoo.com and your answer may be in the next blog!
Power and success in 2014 and beyond!
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