Starting a new business is an exciting career move. You get to finally take the opportunity to take your dream of being an entrepreneur to a whole new level, and you are ready to take the plunge. However, you need money. Getting a loan for your business startup from a commercial banking company is a common route that many new business owners take, and one that you can benefit from as well. Here are things you can expect when you take out your first business loan to get you off the ground.
Defending how much you need
The average business startup needs about 6 months' worth of fixed costs in a loan to get off on the right track. Fixed costs are your costs that never change, including your utilities, rent for your building, and what you pay for insurance. You will need to defend the amount of money you want to borrow when you approach your commercial banker, since these professionals will want to make sure that you are being financially responsible with not only the amount you claim you need, but what you plan on doing with it. If you are borrowing a large sum of money, you will want to provide a list of customers you have already and any immediate sales you plan on having to pay back the first month to show how profitable your business is going to potentially be.
Having to provide collateral
In some cases, you will need to provide collateral or a guarantee to your commercial banker that you are not only able to pay back the loan you are requesting, but that you have assets to back up that loan can help offset the cost of your loan should you fail to pay it back in full. Collateral can be anything from company vehicles to office equipment that you outright own. If you are in a position where you may have to put up collateral, you may want to discuss a smaller loan amount with your banker or consider choosing a larger loan with a shorter payoff time to give them greater confidence in your ability to repay.
Getting a business startup loan is a great way to have the funds you need to make your company soar. In knowing what to look forward to when you speak to your commercial banker, you can be better prepared to do business, which is beneficial for everyone. Prior to sitting down with a banker, it's a great idea to create a business plan with future sales or profit predictions so your commercial bank can feel more confident in offering a loan for your business.