Does your Chicago business need financing, but the thought of securing a loan make your head spin? You’re not alone. Finding proper financing for your company can bestressful. However, it doesn’t have to be if you’re prepared and know what to expect.
Here are a few tips to help set you up for success:
1) Have a solid business plan.
A lender needs to feel confident that you have a road map for future growth. Make sure to include management team information and experience, your target market and product/service differentiator, competition and economic considerations, capital and equipment needs, and financial projections.
2) Know how much financing you need and how you will use the money.
A prepared business owner knows how much he/she needs and for what. The loan request should be specific and should track with your business plan.
3) Review your credit score.
Lenders look at your personal credit history to determine your attitude towards credit. Most lenders are looking for credit scores above 650 minimally and ideally scores above 680. Be ready to explain any bumps along the road to your lender, which could help them be more flexible.
4) Select the right lender.
Do your research. Your lender doesn’t have to be a bank. There are plenty of local resources out there if you do your homework. Consider non-traditional, non-profit lenders, talk with trade associations and contact the Illinois District Office of the U.S. Small Business Administration (SBA). Make sure you understand all the terms and fees associated with your loan as well as the annual interest rate. Resource providers like Small Business Development Center and SCORE Chicago can help you if you’re unsure where to start.
5) Be willing to personally guarantee your loan.
This is a testament to your belief that your business will succeed and lenders will be repaid. In addition, lenders typically like to see equity in a project equal to 10% - 25% of the loan amount, depending on what is being financed. For working capital or refinancing requests, the down payment may be as low as 0%.
6) Be transparent with your lender.
Make sure you fully complete your loan application and provide information requested by your lender in a timely fashion. The more information they have, with enough time, the more options they can offer you.
In many ways, applying for financing is like interviewing for a job. Make sure you’re prepared, put your best foot forward, and the rest is history. To learn more about Community Reinvestment Fund and our funding opportunities for Chicago entrepreneurs, check out our website.
Guest blog contributed by Maureen McKenna, Senior Development Officer, Community Reinvestment Fund, USA.
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