Business Loans and the Best Time to Apply

Every business, small and large, will sooner or later require outside financing or some form of business loan in order to stay in business or to meet the demands of growth and expansion. In most cases business loans will come from a regular commercial bank but other institutions offering business loans include credit unions, savings and loans companies and investment companies. If your business has been in operation for a number of years it is usually easier to arrange business loans. That's because you have already proved the viability of your enterprise and probably have established some form of relationship with your bank or credit union to manage your accounts payable and accounts receivable.

But even if you are just starting out it is still possible to obtain business loans to get your business off on the right foot. Your first step to obtaining business loans is to prepare a business case for the bank or lending institution to review. This will normally include your projected revenues and expenditures, the investments that you and your colleagues have already made in the business, and a description of the market conditions and operating milieu of your business enterprise. This will also allow you to consider and reconsider all possible sources of financing for your business and how much or how little of a business loan you may require. The second step to getting business loans is to ensure that your business and personal finances are in order. In the case of your business that might mean reviewing your supplier payment records in order to ensure that you do not have any outstanding or overdue accounts.

Or at least have an arrangement with your suppliers and creditors to resolve them. On the personal finance side you have to remember that the bank likes to lend money to people and not to corporate entities. Before approving any business loans most banks and financial institutions will do a credit check on the owners or principals of the business to see if there is a pattern or repaying your personal debts. This check is often called the creditworthy check and almost all lenders will carry out this activity before issuing any business loans. Banks are a little reluctant to easily lend money to businesses in the form of business loans because there is an element of added risk to this type of lending activity. But once they can be convinced of the on-going viability of the business and the ability of the business to repay the business loans they are usually happy to oblige.

Getting business loans may never be easy but if you do your homework in advance of approaching your bank or lender your chances of success will be greatly increased.

David Gass is President of Business Credit Services, Inc. His company publishes afree weekly e-newsletter on Small Business Consulting at their web site

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