If you’re dreaming about starting a business, or if you’re already a business owner looking to grow your business, chances are that you’ll need a loan at some point to help your vision become reality. And if you’re a veteran or active-duty service member, you already possess the skills and vital experience needed to make your business a success.
“From resourcefulness and determination to the ability to take smart risks, military experience teaches skills that translate well for business ownership,” said Tony Pica, vice president of business services at Navy Federal Credit Union.
The U.S. Census Bureau’s 2012 Survey of Small Business Owners found that 2.52 million businesses in the United States (or 9.1%) are majority-owned by veterans. And fortunately, there are many resources available for veterans who are interested in starting or growing their business, including those from the SBA.gov.
What are lenders looking for? Here are five considerations to keep in mind before securing a loan for your business:
1. Do your market research and prepare a solid business plan.
Doing research on the industry and preparing a solid business plan is an important step to take when seeking financing for your company. If you can demonstrate to lenders that you’ve done your due diligence , created a detailed business plan, have a trusted team, know the demand for your product or service, and developed a sales strategy to show the viability of your business, you’ll be much more likely to convince them to take a chance on you and your company.
2. Review your overall financial profile.
“Your complete financial health demonstrates your creditworthiness to lenders, so it’s best to review your credit history before applying for a business loan,” Pica said. “You’ll also want to know the amount of money you need to borrow and what exactly it will be used for.”
Additionally, presenting your complete background, such as your education and experience, including whether you’ve worked at or managed a similar business in the past, can also make a big difference.
3. Be willing to invest some of your personal money.
Depending on the lending request, you might need to provide a cash injection and/or collateral. This may include your home, a vehicle, marketable securities, or tangible inventory. By doing so, the lender wants to make sure that you’re willing to put your own skin in the game. In many cases, a certain amount of capital may be required by law.
4. Expanding an existing business? Demonstrate evidence of continued success.
Lenders will want to see evidence of your past and projected cash flow as a result of expanding your existing company. If the loan is for a new business, you’ll need to show lenders your ability to repay it by providing a detailed explanation that includes projected expenses and income, based on solid research.
5. Partner with your trusted financial institution.
Once you’ve done your market research and developed a concrete business plan, talk to your trusted bank or credit union about the business lending products and services available to you.
For example, Navy Federal Credit Union Business Services provides much more than just loans for equipment, vehicles and commercial real estate for its members. They provide a whole suite of options, such as business checking and savings accounts and business credit cards, as well as assistance with bill pay, payroll processing, insurance policies and retirement coverage for employees.
Financing your budding business can be a smooth process with these considerations in mind.