Many small businesses will visit banks hoping to receive a loan to get their business off the ground and of those only a few will walk out with a check. Most financial institutions are over cautious when it comes to lending money to new businesses due to the historically high failure rate of new businesses.
Its no real secret that in order to get a business loan from most banks, you have to be able to show that you really do not need their loan. While bank may be interested in financing businesses, their main concern is the ability to repay the money and insuring the business owner has sufficient collateral and liquid assets to help meet expenses during downturns in the business.
While they may be reluctant to hand money out for a new business there are some thing a business can do to promote a favorable decision and walking into the loan officers office on your knees with your hands folded in a pleading position is not one of them. You must walk into the office with air of confidence, not to be confused with arrogance and dress professionally looking like a potential business owner and a person of integrity who is capable of accepting responsibility for their actions.
Check your credit report before applying for a loan and work to clear out any negative items it may contain. This can take some time so starting on it early can have it cleaned up to more accurately represent your credit worthiness at the time the application is submitted. There are different types of business loans available, some for equipment and some for operating capital and they all have different criteria, which must be met. Make sure you are applying for the right type of business loan. You may qualify to borrow money for new equipment or upgrades but not qualify for an operations expense loan.
Regardless of the type of loan you apply for, be prepared to offer specific reasons why the money is needed. It will not be enough to state the money will be used for business expenses. You will have to break it down into specific amounts for specific purposes. Many bank will not ask for the use of each and every penny of the loan but generalizations about the use of the cash will not be looked upon favorably.
Even with these three issues being addressed there are other factors that will play into the banks decision such as the type of business you are starting and your experience in running that type of business. For example, if you managed a video store for several years and want to open a restaurant, the business aspect of running the store will be a plus but having little or no experience in food service willl be a negative on your application.