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How to Get Financing For Your Business

Getting financing can be an overwhelming task. Here is a brief overview of everything you need to know to get the capital you need for your small business.

How to Get Financing For Your Business

Getting financing can be an overwhelming task. Here is a brief overview of everything you need to know to get the capital you need for your small business.

What Does a Lender Look For?

When considering a loan, the lender looks for the following key factors:

Capacity

What is capacity?

The ability to repay the loan on time from the projected cash flow of the business and feasibility of the business plan and other sources outside the business.

Character

Stability, honesty, and reliability…

Includes credit history, experience, how long you’ve lived at current address, how long you have been at present position, etc.

Collateral

What is collateral?

The availability of assets of the borrower to cover the debt if borrower is unable to make payments

Capital

What is capital?
The money you have invested in the business, have available to invest in the business, or equity earned from business operations

Conditions

Conditions are…

the purpose of the loan and outside factors that affect your ability to repay such a local economy, industry, and competition.

In order for the lender to assess your particular situation, you will need to provide documentation that allows them to review the current state of your business and personal finances.

What info will be needed to start a loan process?

Documentation requirements will vary depending on the type of loan you are considering. The following items are commonly required to start a loan application:

Z

Purpose of loan: equipment, inventory, working capital, real estate purchase, etc.

Z

Amount requested and how it will be used, including owners’ equity available for down payment

Z

Business plan

Z

2-3 years of business financial projections—income statement, balance sheet, and cash flow as well as explanation of the assumptions used for the projections

Z

2-3 years of business financials or tax returns

Z

Schedule of existing debts

Z

Aging of accounts receivable and payable

Z

2-3 years of personal tax returns

Z

Personal financial statements of principal owners

Z

Resumes of principal owners

This All Seems a Bit Overwhelming…HELP!

It is very common for small businesses to, at some point, need assistance with formalizing business plans, forecasting, analyzing business financials, and other business ownership details. Fortunately, there are many FREE resources available to help put those pieces together for you.

First, Dakota Business Lending frequently refers our borrowers to the following entrepreneurial development resources for education, training, and technical assistance:

Women's Business Center

Assists current & potential women business owners with training, technology, & development.

SCORE Mentors

Retired business owners volunteer to mentor  and counsel small business owners

Small Business Development Center

Assists small businesses with business plans & financial projections.

Veterans Business Outreach Center

Assists service members, veterans, & military spouses looking to start, purchase, or grow a business.

Secondly, the Small Business Administration (SBA) website contains a wealth of information on starting and running a business, including:

SBA Learning Center

This portal includes many online training courses on almost every aspect of business ownership

Small Business Resource Guide

Download this guide that includes various aspects on starting and operating a business

Email Newsletter

Email dedicated to providing valuable information about starting & growing a small business

Ready to Consider Loan Options?

Give us a call! We can guide you through the process and point you toward various resources that may become part of your loan package. We would be delighted to help you look at options that work in conjunction with your bank or credit union and are beneficial for the cash flow of your small business. Whether you need $1000 or $5+ million, we have options you may want to consider!