How do I get a business loan?

Need $200,000 USD

[sun818]

I'm thinking of buying 1,000 blue widgets priced @ $200.00 USD each. What kind of preparation and qualifications would one need before a bank would approve such a loan?

[lorax]

If you have $200,000 worth of collateral you could try for a secured personal loan. If you're looking to have this under a business then I'd suspect you'll need to put together a business plan that explains what you intend to do with the $ and then provide enough financial info such that the bank will back your idea.

[gussie]

A solid business plan is a must, and these take a lot of time and research to write. Taking a business course that will help you write the plan is something I found to be very helpful. You need to have collateral to get any type of loan - business or personal. Many small business people use equity in their homes. You can also transfer your retirement savings into a trust and use those funds to start your business. If you don't have collateral, you can look for friends or family that will lend you money, or would like to become an investor in return for a share of the profits. Good luck - getting funded is a challenge.

Gussie

[patoruzu]

Complete reference:

[sba.gov...]

[rogerd]

As with many types of lending, it's easiest to get loans when you don't really need them, i.e., if you have more than enough liquid assets to cover the loan. ;) Banks in the US generally require two things for small business loans: sufficient assets in the business to collateralize the loan, and a personal guaranty. The latter means that the bank can collect from you personally if the business can't pay back the loan; sometimes they might even require more specific collateral, like the deposit of funds or a second mortgage on your home.

One of the challenge of getting a loan to buy widgets is that banks don't like inventory. If they have to sell those widgets, they may be lucky to get fifty cents on the dollar. If those widgets have a short shelf life, like fruit or computer parts, they'll expect even less. Hence, to finance $200K in purchases, they'll probably only credit you with $100K in asset value for the new widgets. You'll have to have $100K in other assets to justify the loan. Cash and marketable securities are good assets - you'll get 100% of their value. Receivables are fairly good assuming you have a reasonable track record of collecting them - the bank will probably count them at 80 - 90% of their value.

Some high interest rate lenders are less discriminating. American Express makes business loans that have less paperwork, higher rates, and are backed up by you personally. Some "asset-based" lenders will lend specifically against receivables or inventory, again at higher rates. "Factors" will buy your receivables from you for cash, albeit at a discount.

Depending on your business, your best source of widget financing is the widget supplier. That firm has a vested interest in selling them, and will usually be far more liberal with credit than a financial institution. A second source of financing is your customer - depending on the situation, you may be able to secure up-front payment for at least a portion of your purchase.

When you are a small business, you've got to get creative! :)

[M2D_Media]

I have personally seen a man with approx. $400,000.00 in assets turned down for an $80,000.00 loan. This man had over $100,000.00 in liguid assets! and was turned down. I am not trying to discourage you at all, in fact, it's the opposite: 1) don't be discouraged if you are turned down 2) a business plan is a must 3) lending companys (banks) don't opperate the same way they used to, MAKE SURE YOU CAN SHOW THE NEED FOR YOUR PRODUCT! That is the most important thing these days. 4) HAVE A BACKUP PLAN : Can you aquire these blue widgets on consignment? Can you set up direct sales with the blue widget manufacturer etc. 5) NEVER GIVE UP... is the product worth all of your efforts? 6) NEVER PUT YOUR PERSONAL PROPERTY ie.house etc. ON THE LINE! LET YOUR PRODUCT MAKE YOU MONEY DON'T RISK WHAT YOU ALREADY OWN. IF THE PRODUCT IS NOT ABLE TO SUPPORT YOU... DON'T SUPPORT IT!

[aravindgp]

I am also interested in knowing ,are there loans like 25,000$ for opening up ultra small business firms.Particularly if I am a foreigner who is investing in US, can I apply for any small business loans?

I have good business plan and educational background.Will this be sufficient to start a ultra small business firm in US.

Aravind