Finance Your Business Without A Business Plan |
|
If you want to start a business and ensure its growth, you will need sufficient capital and for that small business loans are very useful. Traditionally, before starting any business you had to have a business plan to get a small business loans but all that has changed and now you can have business plan-free financing of small business loans. As long as your requirement of a small business loan is less than $100,000, its approval is no longer dependent on the relationship-based banking in the small business loans and credit market but by a computerized credit-scoring program. This is the result of major changes in the industry along with information technology. In our jet-set society, credit scoring has removed the need for a business plan, thereby allowing the entrepreneur to concentrate more on capturing the various opportunities of business before they disappear. This also means a considerable amount of saving of time and money as it does away with the need to hire a business plan consultant. It is now possible to have a faster access to capital from small business loans. The subjectivity of the small business loans process is reduced with automated credit scoring as it removes any bias which may be present in the decision-making process. The negative aspects of these lending approaches are that your relationship with your banker would be less beneficial on the credit approval front and the lack of planning could place more risk on your business decision process. The entrepreneur should adopt the following strategies in view of the new rules governing the credit process for small business loans at many banks. 1) Assess your needs: Estimate your small business loans and apply for at least 10% more than what you actually need. Usually the bank may not be using a credit-scoring model, if it asks for a business plan. 2) Check your credit history: Before applying for small business loans check your credit report for errors and omissions. 3) Provide accurate data: Read and understand all questions in the credit application form and try to give accurate answers, in case of an application below $100,000 where the bank might be using credit-scoring automation. 4) Ensure your industry codes are correct: Provide an accurate description of your business so that the bank gives correct SIC codes to your company as this affects the outcome of your small business loans approval. 5) Select a larger bank: A larger bank is more likely to use the automated credit scoring system more than smaller institutions. The small business lending market is becoming very competitive and the non-banking institutions such as Intuit, State Farm, and GE Capital Corp. are making it difficult for banks to stick to their original norms and forcing them to adapt to the latest trends in the market. This has given the small business owner greater choice to look for such loans. It is not difficult to start a business but to run it profitably and successfully is a different ball game altogether. According to available statistics, at least half of the new companies go out of business before their third anniversary, and one in four new enterprises don't survive longer than one year. The basic requirement for success in any new venture is to have sufficient capital that is essential for running the business and this you can get from small business loans. Before your loan is approved, the loan officer would want to have an in-depth knowledge about your proposal and the officer might ask you for financial information on yourself and your business and personal information about you to determine your business experience. If you want to start a business, the loan officer might ask for a business plan. It is not, however, essential to have a business plan to get small business loans as per the "new rules" of small business lending. |
