If you want to approach lenders or venture capitalists for a loan you want to raise for a startup business, you must must plan well on your project well because they want to know how well your organization is.
9 things you must know before you can approach lenders for a loan on your preparations. Here is what I want to share with you now.
9 Things You Must Know Before You Can Approach Lenders.
1. Business Plan
If you want to approach a venture capitalist or an angel investor or a loan officer for your small business, you need to have a good business plan.
A well-written business plan will help interest lenders to finance your business idea quickly.
When you approach lenders for raising your business, they will ask you to carry out your feasibility study. So be prepared for it.
2. Organise Your Paperwork
Astute lenders would like to see your checklists of documents such as legal operating agreements, tax returns, insurance papers, etc first. Therefore, you should organise your own hard copies in documents to show them on your business projects.
3. Determine How Much You Need
It is not nice if you ask lender to give you whatever they like to lend you. It is not nice if you ask them to lend you any amount they have because they won't like it.
They know you have poor organization on your project or disorganize your paperwork. They don't like if you say you will work capital.
They are so smart. They are different from other poor stupid lenders if they want to make money with interest from business.
So they want to know how much you really need and what you are going to do with that money and then explain to them why you want to borrow from them and how you can pay it back to them.
4. You Must Invest Your Own Skin First.
Unless you invest your own skin in the business, astute investors won't finance your startup business.
When they find what you invest money in the business is insignificant to them, they won't bankroll your business no matter how sound your business ideas is because they want to know how committed you are to your business instead.
Before submitting your loan request to them for your business, you must invest your own personal money in your small or big business not less than 25%.
5. Know Your Business Numbers
It is good to hire an accountant to help you work on business financial statements. But when you sit down with a lender, you need to explain to them what the line items on your balance sheet and income statement represent.
You must master financial accounting or accounting numbers. You must understand what the line item on business financial statements are and then explain to them clearly and they are ready to fund your business.
Financial statements are called financial analysis in your small business. You need to know more about it.
6. Be Transparent
Be transparent. Be free of deceit. Don't keep secrets from lenders. Be open to them on your debt, otherwise they will research your financial history if you don't disclose debt to them on your loan application. They are so smart.
7. Ask Questions About The Process
Make sure that you schedule one at a time when you are likely to have customers because a lender conducts site visits.
If your business partner need to be present, ensure that he or she is there. If your business loan application goes to a credit committee, don't expect a decision overnight.
8. Read The Fine Print
When your business loan is approved as you access your loan application to any loan institutions, make sure that you understand the interest rate, know the all-in cost of your loan application.
You need to ask about application costs, transaction fees, renewal fees and any penelty fees if you are outside this country.
9. Be Yourself.
Know yourself. Be honest with yourself. I want you to know yourself. I want you to be honest and open. That is what I talk about your character.
The investor is really banking on you if they notice how well your character is,especially if you are working with micro banking lenders or alternative lenders or venture capitalists.
That is because if they are impressed with your character, they are more likely to work with you.
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