Many entrepreneurs need some type of financial assistance when starting a company. While it is sometimes possible to raise funds for investors, many startup owners will initially rely on a bank loan to fund the initial costs of doing business.
Applying for a business loan is an important step for a startup company, often because the loan application process is often the beginning of a relationship a banking institution. By establishing a strong loan repayment history, a company may find it much easier to make use of other financial products, such as lines of credit and mortgage loans.
When compiling a loan application package, it is important to include a business plan. Business plans include essential information about a company, including information about its mission, goals, initial processes and leadership. In addition, a good business plan includes an analysis of the industry in which the startup plans to operate, a consideration of competitive businesses and financial projections.
While banks do not issue loans on the basis of a business plan alone, a well-considered business plan is often a key component in a successful application. This is because a bank officer must consider the overall risk when making a decision about a loan. If the officer can see that the startup owner or owners have done industry research, have a strong team of executives and are operating within a profitable industry, it becomes easier to justify extending the loan.
Individuals who are considering starting a business may benefit from speaking with an attorney with extensive experience in business formation and planning. The attorney may be able to provide advice regarding the legal organization of a business, contract terms and the suitability of a business plan for attracting financing.