Congratulations on having a great business idea! You are now starting a journey that will challenge you to make critical decisions for your business. You now find yourself needing to secure funding. You can accomplish this by pitching your idea to angel investors, investors, borrow from friends and family or seek commercial lending. Majority of startup owners do not much, commercial lenders base their decision to lend on the business plan and the owners ability to execute it successfully.
Traditional commercial lending companies and/or online lenders are generally very conservative. Meaning, they want to know that their money is secure in whatever venture they invest in. They will need to be confident that you can and will repay the loan, otherwise they will have to liquidate assets when you default. With that being said, you have to do your best to assure the lender of your confidence in your business and the potential for its success. You will likely not secure funding for your venture if you cannot accomplish this.
Have a Strong Well Written Business Plan
You need to have a strong and well written business plan. Conduct thorough research on all aspects of your startup. Show your potential lender that you have done your homework and are well versed in the space. Have a full and complete understanding of the market and show that you have the systems in place to execute your business plan. I generally recommend that you include your resume or CV to reassure potential lenders that you have what it takes to run the business. Also be sure to include a cash flow projection of at least 12 months, this demonstrates that you understand what to expect.
Secure a Strong Credit Score
You need to verify that you have a strong credit score. There are multiple ways that you can check your score for free. Try Credit Karma or a like service. If you have a low score, you may want to consider dedicating a month or two and improve your score. Study your score and see what is contributing to the low score and work to correct the issues. This will likely make you more eligible for a loan.
Understand Your Needs
You must be able to provide accurate figures or very close estimates on the amount of money that you need. You should provide information on how you will use the funds, how long the loan should extend for (loan period), and how you intend to repay the loan.
Detail Your Current Situation
If you are already operating your startup it is very important that you provide a report showing key performance indicators (KPI’s) in your business plan. Prepare accurate and up-to-date financials, fully understand them and be prepared to discuss them in detail.
After you submit your application and even possibly meet with a representative it is critical that you promptly provide all of the necessary information being requested. Do not try to hide negative results, instead be forthcoming and explain the situation and how you have learned from it and are working to remedy it.
We understand that if for some reason your application is rejected, you may feel like giving up. Instead of giving up, find out why this happened and work to get as much information as possible. Make the necessary adjustments to your plan and presentation. Network with other lenders and ask them for recommendations before trying again. With persistence and with a well organized plan, you will find the right lender who is willing to take a risk on you.
At MCDA CCG we have partnered and worked with 100’s of clients preparing and presenting business plans to our lending partners. We have successfully obtained hundreds of successful loans for startups and early stage businesses. If you would like more information or help preparing a successful business plan or financials please contact us today.