How to get a loan to start a business

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How to get a loan to start a business  – Most people dream to open a business . But many stop such things as lack of confidence , lack of knowledge needed to conduct business, or business ideas. But one of the most common causes of non-realization of the business project is the lack or absence of the necessary funding . This problem has two solutions – to borrow money from friends or go to the bank to get a loan to open a business. It is clear that the rich relatives or friends who are able to borrow the amount needed to start your business, is not at all . And here is one option – to get a loan for starting a business in a credit institution .

Today, many banks offer loans for business development . For start-up company the loan may be the best way to finance a business , for the following reasons :

credit may be granted without collateral ( pledge) in the form of property. The loan can be a guarantee of an individual , including the head of the company . This option is quite convenient , since not all startups have any liquid assets that could be transferred to the bank as collateral .
business loans are provided without setting target use, ie money earned on the loan can be used for any purpose ( for the purchase of goods , raw materials , work payment services , payment of taxes, wages, etc. ).

maximum terms of providing business loans range from one to three years . Credit is provided in the form of a credit line , or at the same time . Banks usually offer deferred payment on these loans for up to twelve months, but the interest must be paid monthly.

The procedure for obtaining credit for business development, is quite simple. Legal entity or individual entrepreneur must provide the bank founding documents , financial statements ( depending on the method of accounting ) , and documents on the guarantor ( identity document ) .

Some banks may be asked to make a feasibility study of the loan ( the borrower’s financial forecast activity for the crediting period ) . After analyzing the documents provided the bank make an appropriate decision . If a decision – to give credit , followed by treatment of the loan agreement .

Credit for business development is provided in the form of a single payment or installments . Cash is generally credited to the account of the bank of the legal entity or individual entrepreneur and already from his account the borrower carries out distribution of cash .

Repayment of the loan is carried out within the period specified in the schedule of loan repayment . The variant of the establishment of loan repayment at the end of the contract period. Repayment of loan is from the account of the borrower . Source of repayment is usually the proceeds from the sale .

In this new business lending by banks is considered as a very risky deal , because there is no evidence that the prospective entrepreneur will not be ruined – do not know how it will work. So the first step to success in obtaining a loan to open a business is properly written business plan . Issuing credit, banks want to minimize the risk of non-repayment , and a business plan is the only instrument that is able to confirm the success of the business project . On the basis of a business plan banks assess the level of risk , profitability of future business , an opportunity to repay the loan.

Based on this, the future of the borrower must carefully research the market and make all the necessary calculations . In order to persuade the bank to grant a loan , a business plan should be the correct accents . Before giving a business plan to the bank , the entrepreneur is recommended by most to assess the feasibility and reliability of future project.

A large role in securing a loan to open a business credit history plays . Presence in the past arrears or late payments can be a defining moment for the failure of the bank. If, however, the entrepreneur has a negative credit history , he should write a letter of explanation indicating valid reasons delinquency in loan repayment .

Many banks are serious about those entrepreneurs who want to get a loan for starting a business , who invest their own money in the venture . As a rule, it is desirable that the share of capital entrepreneur was not less than 25 % of the amount required to open a new business. This situation will improve the bank’s attitude to the person , because invest their own funds shows that the entrepreneur is able to save money and, most likely , in the future will be able to pay off the bank .

Most importantly – an aspiring businessman should be confident in their abilities and knowledge. If the bank still refused to give credit , do not despair , we should pay attention to the reasons for the refusal , and try to fix them with new powers apply to the bank . Everyone knows that one of the essential qualities of a successful entrepreneur is a commitment by the bank in this case will be able to appreciate (along with the satisfaction of all the requirements for a loan ), and finally give the credit for starting a business.