How to get a Loan to Start a Business (June 2020)

How to get a Loan to Start a Business (June 2020) How to get a Loan to Start a Business in 2020 Image Source: Shweta JhajhariaCapital is essential for starting most businesses, by capital we mean  business capital money available to start your company or business. Today one of the best ways to raise capital for your new business is still through traditional lenders such as the banks.When considering the question of how to get a loan to start a business, it’s interesting that in the UK and elsewhere, there has actually been an increase in  borrowing from banks by SMEs and startups. Although banks remain a go-to source of funding for most businesses, new businesses should note that the competition for acquiring a loan is getting tougher.The startup phase is tough, and it’s not any more comfortable for small businesses in growth. Small business lending is a huge issue during the growth phase, just as significant as the question of financing a startup small business was in the earliest days of the firm. For anyone pondering over small business lending agonising how to get a sm all business loan, or a loan to start a new business, the interesting point is that  banks actually want to help startups and small businesses. I know from my experiences as a startup coach that they  want to see SMEs grow and flourish, but in the past 10 years they’ve  come under increased pressure to ensure that the money they lend is not lost. For that reason, thorough approval processes are the name of the game, and that’s where the difficulties start.The fact is, many small and startup business owners are simply not presenting themselves in the right way. And that is why the loans are going elsewhere than for small business lending, or financing a startup small business. For instance, the Bank of England has anticipated and increase in lending to  all but small businesses.Business coaches do assist with this process, and guide entrepreneurs how to get a loan to start a new business, or for an SME, but of course, not every small business or startup will have access to a ment or or a business coach. (adsbygoogle = window.adsbygoogle || []).push({}); 3 points for  planning how to get a loan to start a businessSo what is wrong with the way small businesses and startups are applying for loans?  And most importantly, what can small business owners and startup entrepreneurs to help ensure a business line of credit. Here are three key boxes to tick when planning  how to get a loan to start a business. (adsbygoogle = window.adsbygoogle || []).push({}); 1. Understand the  Key FactorsThe main problem that SMEs seem to have stems from their  lack of understanding of the key  factors in loan approval and financing a startup small business. To be successful, businesses must:Prove the  business has Interest CoverageShow the business’s  Borrowing CapacityClearly display the business’s Cash FlowHave  a robust Business PlanAs mentioned above, the banks want to support the local business community, but when presented with poor or missing historical financial inform ation and unclear base assumptions toward future projections, it becomes impossible for them to approve loans.The banks want to expand their loan portfolios in the SME sector. Thats the reality. A  stellar application  is more than likely to secure  loan approval. Business coaches act  as strategy consultants in helping actually build a business plan, which will help with this aspect of the  application.2. Focus on  Robust Business PlanningThe most crucial factor in obtaining a business line of credit is having a plan that proves the business is viable and easy for the bank to say ‘yes’ to. A good business plan not only presents the  company in a really favourable light but also helps  them to build a more financially stable business. Undertaking rigorous, focused  financial planning and organising is proof that the business can  cover interest payments, and has an ever-improving borrowing capacity while growing cash flow and profitability. It’s all about checking your financi al assumptions and making sure that they make sense to the bank. (adsbygoogle = window.adsbygoogle || []).push({}); 3. Detail  the Crucial Elements  in your Business  PlanTo secure a business line of credit  from the banks, it is vital to create a business plan to incorporate a number of key elements, which should be defined explicitly, including:An understanding of the financial drivers for your particular businessProjected Profit LossProjected Balance SheetProjected Annual Cash FlowMarginal Cash Flow Projections for a 5-year periodAll of these should, of course, be supported with detailed explanations on how you are going to achieve these projections. It is beneficial for you to have a business mentor or business coach to review this sort of information to make sure that there are no loopholes or blind spots that you’ve missed out.Essentially, banks want to know your finances are in order, and that your business has real viability. So whether you want to know how to get a loan to start a business, or an SME planning how to get a small business loan,  look on  it as an opportunity to create a professional and sophisticated business plan and get a re-education about what makes a business more financially viable so that you can grow your business with intelligence and profitability.