The cost of expansion in your business can be covered by a business loan, allowing for profitable expansion.

1. Do You Have a Business Plan Ready To Apply For a Small Business Loan?

It might be your banker, your lender or a close friend, but when it comes to a small business loan application, they all follow the same rules, i.e. they want a well-written business plan that clearly defines your financial goals.

Here are some examples of what a perfect business plan should include:

• The mission and vision of your business;
• Information about the owner, management team, and key employees;
• Products/services you sell and the business USP (unique selling proposition);
• Competitor information and the target market;
• Estimation of the financial situation for the next 3 to 5 years;
• Details about the facilities and infrastructure of the office;
• The Marketing strategy
• And finally, an executive summary covering other relevant points that you feel are worth mentioning.

Tips: As a small business owner, you must aim to provide unique products and services to your customers. Your business plan should convey this clearly to lenders. Lastly, keep in mind that a business plan is not an accumulation of facts and figures, but a portrayal of your dreams and vision. The plan should be concise and precise. You can find examples of business plans online for free.

2. Do you need a business license to open an online store?

It is one of the requirements that many banks and lending institutions impose on small business owners seeking a loan. It's important for lenders to verify that you are the owner of the business and that it's operated legally. Business license rules vary by country and state. If you are unsure about the exact business license requirements of your particular business domain and the state in which you are operating, then you should seek the advice of a business/tax consultant.

Tips: Considering starting an e-commerce site? Once your company / LLP is registered, you will also need to register for VAT. Furthermore, you must open a bank account and apply for a payment gateway. Meanwhile, those who offer online services such as web design, logo design, content writing, etc. can simply register for service tax if they offer taxable services over 10 lacs in a year. There are many online portals that can assist in acquiring the necessary registration for your online business.

3. Are you able to offer collateral for the small business loan?

If you fail to pay back the business loan on time, the lenders will want to know if you have any property they can sell. Don't you think that's frightening? Yes, it is! If you have collateral to show, you will be in a better position to apply for a small business loan and negotiate the terms with the lender. Collateral does not have to be your own home, but it can be a valuable piece of machinery/equipment or inventory from your small business.

Tips: If you are unable to offer collateral, look for other lending options, outside of banks and the big lending institutions. Private lenders and online portals offer collateral-free business loans. They all have their own requirements. You may have to pay exorbitant interest rates if you don't read the fine print and do your own research before applying for collateral-free business loans.

4. Have you completed the basic financial statements for your business?

 This is a tricky question that will often lead to many other questions like “What about businesses that are just starting out and need a business loan?” or "How about newly formed businesses that are not profitable yet?" The answer is, it depends on whom you are approaching for a business loan.

Financial statements from the previous two years that reflect revenue, expenses, and cash flow are typically requested by banks and big lending institutions. Audited balance sheets are also required. Profitable businesses are preferred.