Opening a Box is much more than creating a place to do WODs and perfect doubleunders. It’s a small business venture, one that costs quite a bit of money upfront as well as throughout the process. Luckily, loans exist. If that’s the route for you, here are six tips to get you ready to borrow.
1. Get expert advice.
The Small Business Administration has local Small Business Development Centers (SBDC) and Service Corps of Retired Executives (SCORE) that counsel and mentor aspiring and growing business owners. Connecting with a SCORE office can jumpstart your business plan and help connect with potential lenders.
2. Ask yourself the important questions.
Before advancing too far into the loan abyss, ask yourself a series of questions and refuse to advance in the borrowing process until you have solid answers to each: Is the loan necessary? Can you afford a loan? Can you pay back the loan? Will you pay back the loan? What would you do if you can’t pay back your loan?
3. Research potential lending institutions.
Small business loan approval rates continue to increase by both big banks and individual lenders. Your local Chamber of Commerce and SBDC are there to point you in the right direction. Weigh the pros and cons of big bank loans, and consider approaching a small local bank that might already know you and your business, simply because you’re both small local businesses. Websites such as sba.gov, kabbage.com and biz2credit.com are common starting points.
4. Keep a file of pertinent documentation.
Applying for a loan requires a lot of paperwork, especially if you’re a new business. Banks want to know your debt to income ratio and your plan to pay back the loan. Your local SCORE and SBDC can help you make a checklist of all the necessary forms and documents you’ll need before applying for a loan.
5. Prepare your loan application.
Most banking institutions have their own separate loan application processes that will require you to provide different documents about the nature of your business and finances and answer questions about your business.
6. Know what’s what for the loan application interview
Being positive and professional as well as informed and knowledgeable about your business, business plan and finances will show the lender that you’re serious about this endeavor. Be ready for a variety of questions and backup all claims with facts. You’re selling yourself but you’re inviting the lender into your business. Be prepared to explain exactly how much money you’ll need and what you’ll use it for, all the way down to paying for equipment versus paying staff members. Make sure your repayment plan is in your documentation.
The U.S. Small Business Administration’s website is an great place to begin looking at potential loan avenues. The SBA can help connect you with a mentor who can draw up a business plan and determine the best type of loan for your business.