Looking for business credit involves much time and effort from business owners in order to find the best financing options available. Business credit refers to a company’s history of debt payments and revenue. In order to establish credit, a business must first compile a persuasive business plan that outlines its services, method of operations, and future plans and goals. Potential lenders use this plan to determine whether or not to approve a business’s loan application.
A successful business plan begins with the contact information for the business and its owners and a summary of how the business is organized. Owners should also include a description of the products or services offered and how they will be manufactured or developed. It’s also important to outline the potential market for these products or services and to develop a marketing plan to reach a wider consumer database. When looking for business credit, owners should also explain the payment and duties of employees, potential income sources and how they will be used, and all financial documents pertaining to the business.
Once this business plan is completed, potential lenders will also look at a business’s current credit standing. When looking for business credit, owners should know what lenders look for in a credit profile. Lenders consider capital, the money invested by the owner; collateral, the security available to back up loans; capacity, the ability to repay a debt; conditions, how the money will be used; and character, the trustworthiness and maturity of a potential borrower.
Looking for small business finance typically requires an entrepreneur to research the various funding resources available to find the ones that best suit the needs and capabilities of the business. The Small Business Administration (SBA), commercial banks, and other financial companies provide loans to small businesses.
Most entrepreneurs looking for small business finance go to the SBA, a government agency that provides funding to businesses that have been turned down by traditional lenders, such as banks. The most common SBA loan program is the 7(a) loan. To qualify for the loan, a business must employ fewer than one hundred employees and submit the necessary financial documentation. Financial documentation requirements for start-up and existing businesses vary, but both require a business plan. To apply for the 7(a) loan, business owners should gather the needed documents and meet with a lender who participates in the SBA guaranty program. While the SBA itself does not provide funding, it does guarantee a certain percentage of a small business loan to minimize the lender’s risk.
Existing businesses may find small business financing from banks and independent financial companies. These lenders usually require personal and business financial documents, credit reports, and a business plan to consider an application. Most applications are available online, and approval can take as little as one business week. The exact loan terms vary by lender, type of loan, and an applicant’s financial history.