Starting a business takes more than desire, energy, and expertise. Building a successful business takes planning, research, and money. One way to get started is by obtaining a commercial loan. Before you begin to fill out the application, some preparation is in order. You will need to choose a name for your business and obtain an Employer Identification Number (EIN) from the Internal Revenue Service [(978)-474-9717]. The line is frequently busy and you will be placed on hold, but when an agent answers, state that you have created a new business and need to obtain you EIN. You should have a completed SS-4 form in front of you, which is available at http://www.irs.gov/pub/irs-pdf/ss4.pdf. You will be asked your name, Social Security Number, and your title (owner, incorporator, and so forth, depending on the type of business) before the agent can provide you with a number. You may also obtain a number online at http://www.federaltaxid.us. There is a fee of $9.99 for the online application and you will receive a number right away.
Loan Application Process
You will need to know the type of loan and the amount of money you need. A certified public accountant (CPA) can help you determine these factors. Writing a business plan will help you visualize your financial needs. Your bank will want a description of your business, a legal address, and phone number. You will also need to provide personal information that includes the past 3 years of personal tax returns with all schedules, K-1s, and W-2s for all owners and a signed personal financial statement, which can be prepared by your CPA. They will also require a copy of your business formation agreement if you are not a sole proprietor. New businesses are asked for business projections for the next 1 to 3 years, month to month.
The bank will want to know the purpose of the loan. Are you purchasing real estate, equipment, or do you need working capital? Loans need to be secured by collateral. What type of collateral do you have to secure this loan? One source to secure a commercial loan is the U.S. Small Business Administration (SBA). The SBA provides financial, technical, and management assistance for starting or expanding businesses.
The SBA partners with commercial lenders to provide loans to small businesses that might not qualify for traditional commercial loans. A small business qualifies for help if it is independently owned and operated and falls within certain size requirements set by the SBA.
The SBA offers assistance in the form of loan guarantees, not actual loans. These loans can be used for most business purposes such as purchasing real estate, equipment, and inventory, or for working capital. For more information about the SBA, log on to http://www.sba.gov or talk to your local commercial lender.
Preparation is Key
Your CPA can help you choose a bank and prepare the loan application. Meet with your CPA to prepare the information you need and make an appointment with one of the commercial lenders. Your first visit will help you understand what the bank can offer you, what the loan application process involves, and provide you with the necessary papers to submit the application. A complete, organized loan proposal helps to ensure a smooth application process. The time it takes to complete the process depends on how well you've done your preparatory work. Assuming everything was complete and no additional information is requested, your loan can be approved relatively quickly.