Tips For Securing A Commercial Loan For Your Business Or Product
Posted on: 30 October 2015
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When you've got a great business concept, getting it from development to production can be expensive. That's why many new business owners turn to commercial loan programs to secure financing for their initial production phase and early operation. Securing funds from one of these loan programs requires extensive preparation and a quality pitch. Here are some tips to help you prepare for the loan application meeting and develop a pitch that's sure to help you get the funding that you need.
Clearly Define Your Market
No matter what kind of product or idea you're pitching for a commercial loan, you need to be able to show the lender that you have sufficient potential for sales. Before you attempt to obtain financing of any kind, you'll want to clearly identify who your target market is. After all, if your product is geared to a niche market, it can make your business potential limited. In that case, you need to show what will set your business apart, make it sustainable and ensure future growth and revenue.
Pitch it Early to Establish a Baseline
One key factor that most lenders are looking for before investing in a business is the viability of the product or concept. One of the things that the lenders will be looking for is an established product design that evolves in response to testing and development. To show that, you'd need to be able to show the progression in your product design. Pitch your idea and your loan request early in the process. That way, you can schedule subsequent meetings for loan negotiations that will give you the opportunity to provide updated information and show the growth in your product design as well as how you're responding to issues and setbacks.
Develop a Strong Management Foundation
Businesses with strong leadership are the most likely to secure financing from a loan program or corporate lending agency. As a result, you'll want to have a strong management team in place for your business and be able to show the lenders a clear track record of professional successes for those managers.
As part of the presentation that you develop for your loan application, create a slide for each member of your management staff. Detail each person's professional history, education and the role they play in your business. Those things will help the lenders develop an understanding of who is running the business, which helps them see how stable the business is likely to be.
Consider including this information fairly early in your presentation. That way, your lenders will be able to view your product concept and needs without the underlying concerns about your company's leadership.
Set Reasonable Financial Expectations
It is important that you understand the loan process so that you can set reasonable expectations about the funding that you'll receive. The interest rate that you pay and your repayment term are not the only things to consider. Some lenders may be willing to issue an open commercial line of credit if you pitch an idea that shows enough potential and viability.
Just remember that if you ask for too much money in the loan process, you may cost yourself the financing potential even if the lender believes in the product. Talk with the loan officer before you set a dollar limit to your application. He or she can help you understand what the bank or financing company sees as a reasonable amount based on your company's structure and history.
As you can see, there are many things to consider before you actually secure a loan for your commercial operation. Even if you think you have a great product that anyone would want to invest in, you'll still want to do your due diligence and prepare for the loan application process with these tips. For more information, contact a local loan company like First Mortgage Company, Inc.