Do you have an entrepreneurial spirit? Are you aching to follow your passion and build a business that will bring you independence and security? A small business loan could give you the money you need to start up your small business, or, if you’re already in business, the funds you need to amp things up a notch.
These days, small business owners have options when it comes to funding their businesses. You can apply to a traditional bank for a traditional small business loan, or you can go with one of the money online lenders that can offer fast approval and a quick injection of funds into your business.
To get your own small business loan, you need to understand your own loan eligibility, be clear on the purpose of the loan, have your documentation in order, and be willing to go through the application process.
Assess Your Own Business Loan Eligibility
Eligibility for small business loans can be based on a number of things. Your company’s annual revenue and the length of time you’ve been in business will matter – obviously, lenders will be more likely to want to loan money to businesses that have healthy annual revenues.
Make sure you understand what the lender’s requirements for this are so that you can be sure you’ll meet them before taking the time to file a loan application. Lenders also typically like a company to have been in business for at least two years before they’ll consider making a loan, but that’s changing. These days, you can find online lenders for small business loans that have been operating for six months or less.
Your personal and business credit scores will also be used to determine your likelihood to repay a business loan. You should aim for a personal credit score of at least 650 and a business credit score of at least 160. You may further need to provide collateral, such as property or equipment, or a personal guarantee that puts your own personal assets up as collateral for the business loan.
Be Clear on the Purpose of the Loan
Knowing exactly what you plan to use the loan money for is important for getting the right kind of loan product. For example, if you want to buy business premises, you’re going to need a mortgage loan.
If you want to buy office furniture or industrial equipment, you’re going to need an equipment loan. In any case, lenders will want a clear explanation of your intended purpose for the loan money.
Choose Your Lender
Once you know how much you need to borrow for your purpose, you can start looking at lenders. If you need money quickly, an online lender might be the best bet – they can review your application fast and some will get you money as soon as the same day, if not within two or three days. However, online lenders can charge higher interest rates.
Traditional bank loans for small businesses are a good option if you can wait out the longer application process. Traditional small business loans offer lower interest rates. However, they’re harder to get and the application process can take weeks.
Have Your Documentation in Order
Before you start gathering your documentation to apply for a small business loan, you should contact the lender you plan to apply with and ask what documentation they’ll need to approve your loan application.
Usually, they’re going to need documentation of your business plan, profit and loss statements and other financial statements, a copy of your business license and articles of incorporation, copies of your business and personal tax returns going back some number of years, copies of your premises lease, and even your personal and business bank statements going back some length of time.
Where to Find Small Business Loans
They provide necessary working capital for small businesses to purchase inventory, cover operational costs and hire employees. If you are seeking one for your business, there are several options available that may meet your needs. Carefully assessing the terms of it and your ability to repay is crucial to avoid any complications later.
Some popular places to find them include:
- Traditional banks offer loan products for established businesses that have generated revenue in the past six to twelve months, with amount limits starting at upwards of $100K+.
- Online-based lenders typically offer smaller amounts beginning around $25K and approval is often quicker than a bank.
- Non-profit organizations can connect borrowers with government grants that don’t need to be paid back.
- Credit Unions also offer packages based on various factors such as credit scores or total assets.
- Governmental programs promote economic stability by offering funding support through various measures such as tax incentives or interest rate reductions.
Be aware of significant differences between unstable debt funding such as high-risk merchant cash advances and more secure standard line of credit agreements when considering this kind of option for your small business; so take some time to research lenders before committing to a contract agreement.
Unstable debt financing could impair cash flow and disrupt daily business operations if short-term repayment becomes difficult due to unforeseeable circumstances or rapid changes in market conditions; leading to potentially upending any profit potential from the added capital investment even during periods of growth potential.
Go Through the Loan Application Process
Once you have your documentation in order, you can go through the application process. You’ll have to give basic financial information about yourself and your business, including your Social Security number (SSN), your business name and tax ID, the amount of money you want to borrow, and what you want it for.
Contact your lender for guidance on how to fill out the application. Depending on the lender you choose, your application may be processed on the same business day for an online lender or a few weeks later for a traditional lender.
Consider refinancing options
After you’ve received it, it’s important to remain aware of all your repayment options. If you’re receiving these funds from a lender, be sure to carefully examine their repayment terms. You may be able to switch lenders or refinance your loan, depending on the type that you originally took out.
If you’re unsure about what refinancing options are available to you, it’s important to seek assistance from financial and legal professionals who specialize in this area. They can provide advice and assistance with the process of refinancing in order to find one that suits your needs best. It’s essential that this process is completed thoroughly in order for the long-term success of your business.
When considering available refinancing options, keep a few key things in mind:
- Check with existing creditors if they offer more favorable terms than other lenders
- Review interest rate restrictions and how any associated fees will affect overall repayment costs
- Make sure that you understand all conditions before agreeing to new repayments and do not take out more than is necessary
- Make sure that you fully understand the impact that refinancing will have on your current credit score
- Research all possible lenders thoroughly before making a decision
By considering all available refinancing options and seeking professional advice when needed, small business owners can ensure they make an informed decision when it comes time for managing them after approval has been granted.
It can help you make your entrepreneurial dreams come true! Get the money you need not just to stay in business, but to help your business grow.