Get a small business loan

Insufficient funding is one of the main reasons why 80% of businesses fail in the first year and a half. As a business owner, not only do you have to cover all operating expenses, but the time and effort required to be successful means that you will almost certainly have to say goodbye to your day job and regular paychecks. Unless you have saved enough to pay everything for at least 18 months, you will probably have to find other sources of funding.

However, here we run into another problem. A recent survey cited by the Credit Union Times showed that only about a fifth of small business owners (roughly the same rate as successful businesses, by the way) rely on a small business loan. The survey showed that 62% were afraid to take out a loan and almost a quarter of those surveyed think that one would not be approved. TO The Harvard Business School working paper by Karen Mills (Administrator of the US Small Business Administration as of 2013) showed even more grim statistics. Banks have continued to apply measures restricting lending to small businesses since the financial crisis broke out, as these loans are generally always riskier than those of large businesses. Loans worth $ 1 million or less – the domain of small businesses – have fallen 21% since 2008. These loans accounted for half of all bank loans in 1995, but only 30% in 2012.

So what can you do to give yourself a better chance of getting a loan?

As the saying goes, “The devil is in the details.” Given the strict requirements of banks, you will need to come up with a very convincing plan that shows that your business will actually make a profit. Every number presented should be backed by solid evidence or at least some realistic projections backed by in-depth research. There should also be a clear plan on where the money will go and how it will influence the success of your business.

Apart from this, all your personal finances will also be scrutinized, so make sure your taxes, mortgages, credit cards, assets and liabilities, and even your credentials are spotless and in order.

The bottom line is, if you believe in your business idea and do your due diligence to come up with a solid budget and business plan, there should be no reason to be denied a small business loan. Otherwise, you may want to reconsider quitting your day job.