Getting a small business loan may seem like quite the challenge, but it does not have to be that way. By taking certain steps, you can increase your chances of securing the loan you desperately need to grow your business or any other reason for that matter.
Without further ado, here are some finance and loan tips for small businesses you should take into consideration:
Prepare Beforehand
If you think you can apply for a loan overnight, think again.
When it comes to obtaining a loan, you need to prepare beforehand to ensure you are successful. From day one, ensure your company is on the right track.
Lenders look at two factors while evaluating loan applicants: business profits and personal finances. Before you even consider reaching out to lenders, fix or improve your credit score first. You also need to organize your accounting records and pay off debts, if any.
Prepare yourself to show your plans for growth and financial history. By being an open book, lenders may find your business to be professional and well prepared.
Understand the Different Types of Loans
Knowing you need a small business loan is not enough. You need to know and understand your options.
The more you find out about different business loan types, the better the chances of you finding the type that best fits your business needs and requirements.
The best way to obtain a small business loan not only depends on your situation but the type of loan you are looking into.
That being said, here are some loan types for you to consider:
- Long-term loans
These are larger loans that need to be paid over longer periods with lower interest rates
- Term loans
These are lump sums that need to be paid back with interest after a certain amount of time
- Short-term loans
Similar to term loans, but they need to be paid back in a shorter amount of time
- Equipment financing
This type of loan covers used and new equipment
- SBA loans
These are much smaller loans that are endorsed by the SBA (Small Business Administration)
- Alternative financing
This includes peer-to-peer loans, crowd funding, cash advances, and other sources of financing not from the bank
- Business lines of credit
This only needs to be paid back if the money is used in the first place
Look at Every Opportunity
Just because you think you have a great opportunity, does not make it so. There are a lot of different business loans available out there, so make sure you check each and every one of them until you find one that is right for your business.
Do your homework regarding each lender in regards to their loan offerings, terms and conditions, and specializations.
Take a note of lenders that have dealt with businesses similar to your own. While doing your research, take the age, industry and size of the lender into account. Do not forget to look into alternative funding options, like online lenders, and traditional banks. Once you have found suitable options, apply to two or three different lenders.
As long as you prepare well, and take the aforementioned tips into account while applying for a small business loan, you can secure the loan you need in no time.