Published on August 13th, 2013 | by Jose Vasquez0
10 Questions to Ask Before Applying for a Bank Loan for Startup Tech Companies
At some point, most entrepreneurs will need to consider applying for a bank loan, and these 10 questions can get you ready for the process.
Effective cash flow management is one of the most crucial factors for the long-term success of a company, but the reality of business management in most cases warrants getting some kind of bank loan. Unfortunately, many entrepreneurs rush into a loan without carefully considering their situation beforehand.
Lisa Girard, a business guru and personal finance expert, recently published a short feature on common questions a startup entrepreneur should ask before pursuing any bank loan. I’ve taken these questions and added in a few others I think are appropriate into the guide below. Make sure you know the answers to these 10 questions, or at least have some kind of idea, before you follow through with the loan securing process.
- Will I qualify? Possibly the most important question. Evaluate your current finances against the type of loan you’d like to provide.
- What’s my business’s credit score? If you don’t know, you might end up in a poor position when it comes time to settle terms for the loan.
- What do I actually need? You might be tempted to get a loan for more than you actually need, but be realistic with your current requirements as a company.
- Will this help my business grow? Make sure your loan will have a positive impact on your company before proceeding.
- What assets can I use for collateral? If you’re just starting out, this one might be difficult for you—then again, as a tech company you may not need much capital to start.
- Is my revenue mature enough to repay the loan? Consider what you can count on regularly, and how that stands in relation to your loan.
- Do I have adequate documentation? Make sure you have all the legal documents you’ll need to secure the loan.
- Are all my other personal finances in order? Pay off any standing debts and get yourself in a positive personal condition.
- What penalties and stipulations do I need to avoid? Know what you’re getting into before you get into it.
- What is my plan for paying the loan back? This is critical. Never enter a loan unless you have a solid, reliable plan to pay it back.
Once you’ve answered all these questions satisfactorily, you’ll be ready to hunt down your ideal loan.
Take a look at the original story here.