Starting a small business has many challenges, but knowing the ins-and-outs of small business development from a financial institution’s perspective can give you an advantage for success.
Here, experts from Desert Schools Federal Credit Union provide several expert tips for those looking to start their own small business.
#1 Research your industry
Having a thorough understanding of the industry you are entering as a business owner is a key first step. Know what you’re getting into – what the best practices of your industry are, who your competitors are, potential challenges, areas the business will serve and how you plan to be successful. This research will be helpful in creating a business plan, or the blueprint a financial institution will use to help you in your business development.
#2 Know what your banking needs are
A business plan will help identify what your financial needs are, while differentiating between long-term and short-term needs. A company can be hurt with the wrong type of loan. Short-term loans provide working capital, or what a business needs to work through the business cycle. Long-term loans allow the business to invest in assets such as large machinery. Knowing the difference will help lead your business to success.
#3 Present a completed loan application
When submitting an application for a loan, ensure it is complete. Financial institutions need a signed and dated application to move forward with processing the loan. If an application is not signed, financial institutions are not authorized to obtain a credit bureau report. In addition to the application, other essential documents that are needed include: complete personal and corporate tax returns and complete personal and corporate financial statements. These financial statements should include accounts receivable and accounts payable summaries. If you are unsure, ask upfront what exactly is needed to process a loan in a timely manner.
#4 Be organized
Once a bank or financial institution receives a loan application, there are many additional aspects that are evaluated in the approval process. An applicant’s financial history and current situation are reviewed. Financial institutions evaluate an individual or company’s financial housekeeping such as late payments or interest, excess overdrafts or withdrawals, and change in management, ownership or key personnel at a business. Maintaining an orderly and “healthy” financial state will benefit the loan applicant.
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