6 things entrepreneurs need to know about getting a business loan

Owning your own business means that you have to manage more than just your service or product – it means making sure it stays financially healthy and growing strong. Whether you’re just starting out or already running a successful business, getting a commercial loan is one of the biggest decisions you’ll face.

If you’ve already made up your mind that a loan is the right decision for you and your business, there are a number of items you’ll need to address first.

1. Determine the Kind of Loan You Need

Business loans aren’t one size fits all. Before committing to a loan obligation, you should figure out how much you need so you don’t end up financing more than you need to. One of the most popular programs offered through the Small Business Administration (SBA) is the 7(a) business loan. The amount available goes up to $5 million and can be used for building renovations, existing business debt refinancing, purchasing real estate and other types of business expenses.

However, if you need $50,000 or less, a SBA microloan could be the better option. This type of loan comes with more restrictions — you can’t use the money to pay an existing debt or purchase real estate, like with an 7(a) — but if you only need a little bit of help, it could end up saving you money instead of having to finance a larger 7(a) that you don’t really need.

2. Have a Clear Purpose for the Loan

Applying for a loan through a bank or credit union means rigorous information gathering. One of the first things you’ll need to know and be able to explain is what you want to use the money for. If the loan officer thinks you don’t have a clear vision or purpose, she’ll think twice about lending you money.

3. Have a Good Business Plan

No matter what type of business loan you’re applying for, you’ll need to have a business plan ready to show off. It doesn’t have to be complicated – as long as you have a basic layout of your business strategy and how it will profit, most banks will accept it. They want to see how well you understand your own financial situation and how you intend to repay the loan. Explaining how you compare to your competitors and plan to grow will go a long way in instilling confidence so you get the loan.

4. Be Prepared to Personally Guarantee the Loan

If you operate as a partnership or sole proprietor, then this part shouldn’t surprise you, but if you’ve incorporated or structured your business as a limited liability entity to separate your finances from the business, you might be in for a shock. Unless you can demonstrate several years of profitability, you’ll likely need to personally guarantee the loan. Be prepared to put down collateral to get your loan processed. The more assets you have – such as a mortgage, automobile, or investment accounts – the better your chance of getting approved. From SBA.gov: “The more money owners have invested in their business, the easier it is to obtain financing.”

5. Have Accurate Financial Records – or Better Yet, an Audit

To qualify for a loan, you’ll need to show all your personal and business financial records prepared to the bank. If there are partners, they will also need records available. You’ll need detailed records of assets, tax returns, net worth statements, business credit report and other financial statements. If you have any negative marks on your credit report – such as an account in collections – you’ll want to clean them up before you apply for a loan.

6. Maintain a Solid Debt to Equity Ratio

As an individual, you might not think much of your debt ratio, but as a business owner with an outstanding loan, it will become a critical piece of information. Banks define a range these ratios need to fall within, or else the loan will be considered in default. The more equity ownership in the business, the better off you are. A good rule of thumb is to finance half or less of the value of your business. Anything over that starts to look like a company laden with debt.

Remember You Have Alternatives

Before you decide on a business loan, you might try other avenues first. It might be worth giving up some of your ownership in return for investment capital by taking on angel investors or partners. In exchange for diluting your ownership, you’ll get access to money that won’t be a liability or affect you personally if the company suffers a loss. If it’s a large amount you need, splitting it up between equity financing and debt financing can save you a lot of trouble down the road.

From GoBankingRates.com: 6 Things Entrepreneurs Need to Know About Getting a Business Loan

ad-high_impact_4
Business
A Facebook-branded space inside of Macy’s at the Fashion Show shopping center
A Facebook-branded space inside of Macy’s at the Fashion Show shopping center will showcase 13 small businesses in November and December and seven in January. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfaye
T-Mobile uses ticketing data to plan for event
T-Mobile Executive Director of Arena Operations explains how ticket sales data and demographics help plan staffing, vendors, parking and operations for an event.
Costco opens its doors in southwest Henderson
Costco has opened its fifth Las Vegas-area location near the intersection of St. Rose Parkway and Amigo Street. (K.M. Cannon/Las Vegas Review-Journal)
Las Vegas strip mall and office park
The Krausz Cos. and WG Group bought a strip mall and an office park in Las Vegas for nearly $80 million total. They acquired a portion of Tropicana Beltway Center in the southwest valley for $59 million. They also acquired the Westbay office complex in the Las Vegas Medical District. The buyers are former owners of The Gramercy, a once-mothballed mixed-use project in the Las Vegas suburbs. They sold The Gramercy in phases for more than $100 million.
Mario Barth talks about the growth of the tattoo industry
Celebrity tattoo artist and business owner Mario Barth talks about the growth of the tattoo industry at The World of Tattoo industry trade show at Planet Hollywood in Las Vegas
$7.5M Las Vegas pot dispensary opens near Las Vegas Strip
Planet 13, which bills itself as one of the largest dispensaries in the world, opened to the public Thursday. It has entertainment including an interactive floor and floating orbs. (K.M. Cannon/Las Vegas Review-Journal)
Caesars CEO to step down next year
Caesars Entertainment Corp. CEO Mark Frissora will leave the casino company in February. Frissora has been CEO since July 2015. He was named CEO right after Caesars' operating company filed for Chapter 11 bankruptcy protection Caesars Entertainment emerged from bankruptcy protection in October 2017 Before Caesars, Frissora spent seven years as chairman and CEO of Naples, Fla.,-based Hertz He led the consolidation of the rental-car industry through Hertz‘s acquisition of the Dollar Thrifty Automotive Group.
Planet 13 in Las Vegas adds twist to marijuana dispensary look
Planet 13, which bills itself as one of the largest dispensaries in the world, opened to the public Thursday. The dispensary is located near the intersection of Desert Inn Road and Sammy Davis Jr. Drive, near Trump International, in Las Vegas. Planet 13 has plans in the future for a coffee shop, a tasting room for marijuana-infused beer and wine, a lounge for consuming marijuana on site if that is legalized and space for food.
Caesars Entertainment opening 2 resorts in Dubai
Cove Beach will open on Meraas’ Bluewaters Island in Dubai in November and Caesars Palace Bluewaters Dubai and The Residences at Caesars Palace Bluewaters Dubai will open in December. (Caesars Entertainment)
Bellagio, MGM Resorts International’s luxury hotel turns 20
The more than 3,000-room Bellagio hotel is situated on the site of the former Dunes Hotel. The Dunes was imploded in 1993, and construction of the Bellagio started in 1996. It cost $1.6 billion to build, making it the most expensive hotel in the world at the time. The Bellagio was former Wynn Resorts Ltd. Chairman and CEO Steve Wynn’s second major casino on the Strip after The Mirage. MGM Resorts International acquired the property from Steve Wynn in 2000. (Tara Mack/Las Vegas Review-Journal)
Facial recognition software at G2E – Todd Prince
Shing Tao, CEO of Las Vegas-based Remark Holdings, talks about his facial recognition product. (Todd Prince/Las Vegas Review-Journal)
Former NBA player, Shaquille O'Neal, speaks about his new Las Vegas chicken restaurant
Former NBA player, Shaquille O'Neal, speaks about his new Las Vegas chicken restaurant. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfaye
Bobby Baldwin to leave MGM
MGM Resorts International executive and professional poker player Bobby Baldwin is set to leave MGM.
Caesars has new armed emergency response teams
Caesars Entertainment Corp. has created armed emergency response teams. They are composed of former military and law enforcement officials. "These teams provide valuable additional security capabilities,” Caesars spokeswoman Jennifer Forkish said. Caesars is hiring Security Saturation Team supervisors, managers and officers, according to LinkedIn. The company did not say how many people it plans to hire for the units. (Las Vegas Review-Journal)
Las Vegas, airlines prepare for CES
CES in January is expected to attract more than 180,000 attendees. (Las Vegas Review-Journal)
AGS partners with Vegas Golden Knights
AGS is the nation’s second-largest manufacturer of Class II slot machines used primarily in tribal jurisdictions. It announced a marketing partnership with the Vegas Golden Knights NHL team. (Las Vegas Review-Journal)
Lehman Brothers bet big on Las Vegas
Lehman Brothers collapsed 10 years ago, helping send the country into the Great Recession.
Fremont9 opens downtown
Fremont9 apartment complex has opened in downtown Las Vegas. (Marcus Villagran/Las Vegas Review-Journal) @marcusvillagran
Ross & Snow launches in Las Vegas
Luxury shoe brand Ross & Snow has opened in Las Vegas, featuring "functional luxury" with premium shearling footwear. (Bailey Schulz/Las Vegas Review-Journal)
Remote Identification and Drones
DJI vice president of policy and public affairs discusses using remote identification on drones. (Bailey Schulz/Las Vegas Review-Journal)
Drones and public safety in Nevada
Two representatives in the drone industry discuss UAV's impact on public safety. (Bailey Schulz/Las Vegas Review-Journal)
Frontier Airlines to launch flights from Las Vegas to Mexico
Frontier, a Denver-based ultra-low-cost carrier, will become the first airline in more than a decade to offer international service to Canada and Mexico from Las Vegas when flights to Cancun and Los Cabos begin Dec. 15. (Rick Velotta/Las Vegas Review-Journal)
MGM Resorts International CEO Jim Murren addresses Oct. 1 lawsuits
MGM Resorts International Chairman and CEO Jim Murren addresses criticism his company has received for filing a lawsuit against the survivors of the Oct. 1 shooting. (K.M. Cannon/Las Vegas Review-Journal)
MGM Resorts International opens the doors on MGM Springfield
Massachusetts’ first hotel-casino opens in downtown Springfield. The $960 million MGM Springfield has 252 rooms and 125,000-square-feet of casino. (K.M. Cannon/Las Vegas Review-Journal)
MGM Resorts International prepares to open MGM Springfield
Las Vegas-based MGM Resorts International gave news media and invited guests a preview of the $960 million MGM Springfield casino in Massachusetts. The commonwealth's first resort casino will open Friday, Aug. 24. (K.M. Cannon/Las Vegas Review-Journal)
A Walk Through Circus Circus
It only takes a short walk through Circus Circus to realize it attracts a demographic like no other casino on the Strip: families with young children. (Todd Prince/Las Vegas Review-Journal)
Morphy Auctions, a vintage slot machines seller, wants gaming license
Vice president Don Grimmer talks about Morphy Auctions at the company's warehouse located at 4520 Arville Street in Las Vegas on Thursday, Aug. 16, 2018. (Rick Velotta/Las Vegas Review-Journal)
TOP NEWS
News Headlines
Add Event
Home Front Page Footer Listing
Circular
You May Like

You May Like