How to Get a Loan to Start a New Business

Starting a business can create additional income for your household and presents the opportunity to be your own boss. Unfortunately, starting a new venture requires money. And if you don't have personal savings, you'll likely need a loan from a bank or credit union.

Getting money to start a new business is tricky, and lender have strict guidelines. Before completing your loan application, consider ways to boost your chances of getting approved.

Step 1: Improve your personal credit. Banks and credit unions will review your personal credit history when deciding whether to give you money for a business. Pull your credit report and order your credit score. Take steps to increase your rating by paying bills on time and reducing debts.

Step 2: Create a business plan. Write and present a business plan to potential lenders. This document outlines the purpose of your business and describes how you plan to use funds.

Step 3: Choose collateral for your loan. Having collateral or property to secure the loan improves your chances of getting funds. Use your vehicle title if you own your car outright or consider a home equity loan and use your property as collateral.

Step 4: Present tax returns. Being employed or having steady income is necessary to acquire funds for a new business. Hold onto your paycheck stubs, w-2's or tax returns as proof of income.

Step 5: Ask someone to co-sign the loan. If dealing with a low credit score, find a co-signer for your business loan. Select a person with a good credit history, which can help you secure a lower interest rate and a loan approval.