According to estimates, there are more than 600,000 small businesses that opened every year in the United States. If you have your own business plan in mind, one of your first plans of action will be to secure financing to help fund the start-up of your planned operation. Thankfully, there is no shortage of lenders out there willing to help prospective entrepreneurs get started with their own business endeavor by providing them with SBA (Small Business Administration) loans. However, there are some requirements that you will have to meet before you can be approved for a small business loan when you are just starting out.
You must show that you will have a for-profit business in an industry that is considered eligible for a loan.
One of the very first things that will be considered when you apply for an SBA loan is if your business is a for-profit business. Non-profit businesses are not eligible for SBA loans. Additionally, your business has to be a qualified type of business from a certain industry before you can qualify. There are actually some types of industries that are not eligible for small business loans, such as life insurance companies or lending agencies. Likewise, you will probably not be able to get a loan if you plan to open a business that is only going to generate primarily passive income.
You may have to have a reasonable personal credit score.
Even though you were not technically applying for financing for a personal reason, it will still be you who is responsible for repaying what you are borrowed. Therefore, most small business loan lenders will take a look at your personal credit score. Even though their requirements can be a little more flexible than what they would be for a personal loan, they will still be looking at things like derogatory marks in late payments.
You'll have to show the potential for profit with your business plan.
It will also be important that you can show a prospective lender that the business plan that you have in mind is capable of generating a profit. Of course, you can't just walk in and say you have this business plan and it will generate an income; you will actually have to work the numbers and prove to them what your operating expenses will be compared to your potential for profit in the specific industry your business is in.
For more information on SBA loans, contact a lender near you.