Often when starting a small business getting a loan is a necessity. Just because it’s necessary though, doesn’t mean it’s easy, it can be a complicated process if you don’t know what you’re looking for. By following these steps, we will help you to make that process easier and much less stressful.
You need to evaluate the different types of loans to decide which one best suits your needs. There are a lot of different options here, so you need to look into each one carefully, getting advice here will be beneficial in the long term to make sure you do what’s right for you and your business.
Short-term loans are the easiest to qualify for with your small business and they are usually the fastest in terms of funding times. However, normally have a higher APR so bare this in mind when picking.
Long-term loans, as the name suggests, offer the longest repayment terms and have the lowest interest rates. This can be a good option if you need a large sum to get started but also need a longer period to pay it back. SBA loans are guaranteed by the Small Business Administration and will offer you better interest rates and terms for your long-term loan.
Asset-based loans use assets you’re acquiring or your current assets as collateral for your loan. This can be beneficial if you don’t qualify for a long-term loan. The best options for this are equipment loans but these only cover the purchase of equipment and not other business-related purchases. Or invoice financing which will help you to cover any unpaid customer invoices without having to wait for your customers to pay them.
Once you have evaluated the different types of loans, you will need to determine whether you are eligible for the one you want. This will be decided on a number of different points such as how long you have been in business, your credit score, your minimum annual revenue and proof that you can repay. It is your job to prove to the bank or lender that it is worth investing in this loan, it will be difficult to prove that if you have no business track record. Having a business plan which outlines all the details of your business, products, target customers, employees and financials will help to strengthen your case. “Make sure that your balance sheets and financial statements are included along with your personal financial summary. All of this will help to support your case,” adds Maryann Brown, small business finance specialist and staff writer at State of writing and Top essay writing services.
Decide on who will give you the loan. Research the types of lenders which are available and applicable to your business to find the one best for you. This can include banks, peer-to-peer lending sites, direct online lenders, bank lenders backed by SBA guarantees or credit unions. “It is recommended to find a lender who has experience loaning to your business type, don’t forget to ask them questions, find out what they know about the industry, do they understand how it works and how your business will work? If they have experience it is more likely to make your life easier as they will better understand the requirements and if they are achievable by your business,” advises Nancy Miller, business writer and contributor to Best British Essays and Revieweal.
Now that you have chosen your above options it’s time to put together your loan application. This is where it’s vital to know that you meet the minimum qualifications for your chosen loan type. Make sure that all your documentation is in order and up to date. Most of the processes will give you a form to submit as well as a list of what documentation they require, double check everything before you submit it. You should also be prepared to detail how much funding you will require and what the loan will be used for.
Make sure that all the details of your loan are clear and achievable. There are plenty of different options out there, understanding which one works best is vital in making your small business succeed with the financing you need.
Freddie Tubbs is a business writer at Write My Australia and Top Assignment Writing Services in Victoria. He regularly attends business and marketing events, and contributes posts to UK Writings blog.