Not all business owners dive into business owning tons of gold. However, you will need some money to make more of it. Capital is pivotal for any business, no matter its size. Whether you are just hitting off the ground, or already have an established small business, or planning to expand your business, investment is vital for your business.
This is where business loans come in as your saviour. Most small businesses are financially assisted by business loans. When you are starting out, applying for a business loan can seem daunting. You would have so many itching questions like “How to get a loan for a small business?”. And you might be hesitant about the complex procedures and procurement process incurred. The procedures are complex and need care, but with proper records and a timely approach, you can increase your odds of getting a small business loan.
In this article, you will learn how to apply for a business loan without any hiccups in the process to get the desired amount.
Set out with a concrete plan
Having a solid plan on how you are going to spend the money you are about to get is very important. Before you think about applying for a business loan, you must clearly know your business plan and have a clear vision.
It is better to come up with an elaborate presentation, spelling out your business objectives, what you are going to do with the procured money, how it grows profit for your business. With these statements, you make it clear to the bank that you are going to make profits in bounty. The goal is simple. You must make it clear to the bank that you will be able to repay the loan on the dot without any friction.
Settle with a specific number
When you are clear with why you need the money, the next step is to arrive at a concrete number. Take time, research and find out the expenses incurred round-up with a certain number. Include your peripheral costs and all expenses.
For example, when you are planning to buy some equipment with the loan, do include the peripheral cost related to the equipment such as transportation and installation charges. Be confident and transparent with the number you ask for because only with that your bank can offer better financial solutions.
Check your credit score
You can confidently draw funds from a lender with a decent business line of credit. There can be a cap on the funds, but the line of credit will be your saviour when you face unexpected expenses and gaps in business cash flow. Line of credit works just like your credit cards. However, you will always have funds readily available in your bank account like how you have funds in your checking account.
When you apply for a small business loan from a bank or a lender, they are likely to check both your business and personal credit scores. Your lenders can look through your credit history, so always make sure to keep clean and reliable records.
Make sure if you can repay
Everything runs positive through the course of applying for a business loan and getting it approved. But the real challenge arises when you need to repay it. Analyse your business finances, cash flow and think if you can afford to repay the loan each month. The payment policies differ from lender to lender. So make sure you take into account everything mentioned in the repayment policy and see if you can consistently go with it.
Suzanne Darden, a finance specialist at the Alabama Small Business Development Center suggests that if you want to repay your loan without scratching your purse, you will need a total income that is 1.25 times your net expenses, including your loan repayment.
Take your collateral into account
Business loans when acquired from banks are completely secured and loans from certain lenders are not secured. When you apply for a secured loan from the bank, you will need to provide business collateral to the bank to get your loan approved.
Signing up for a loan with collateral by your side can be risky, but on the other side, it increases the chance to raise the bar for the loan amount with a minimum interest rate.
And some lenders expect you to pay off the loan if your business cannot. This is called a personal guarantee and is a secured payment assurance. When your business fails to pay the loan, these lenders will come knocking on your door chasing your personal car or any other assets.
Compare the available options
Once you are ready with your business plan, plan how much money you need and how to utilize them, and find reliable ways to repay the loan, the next step is to search for a lender. Different lenders offer different types of loans. so, do your research properly before you settle down with a lender.
You can seek loans from big commercial banks, credit unions, direct online lenders or even peer to peer lending sites. And coming to the type of loan, the usual one is the term loan. This is the basic form of loan, where you can spend the borrowed amount for any number of purposes like business expansion, repair, equipment purchase or renovation.
Or you have the SBA, which is Small Business Admiration loan. You can avail this loan only of you are in the United States. SBA loans are highly secured and comes with minimum interest rates. But you will need to submit a lot of documents and go though a lot of process to get your loan approved. It takes a lot of legwork and time. But this loan option can be ideal if you can manage for some months with your resources.
There is another type of loan, which is offered especially for you to purchase equipments. You can invest the amount obtained from this loan i buying machinery, elevators, vehicles and even computer software and hardware. In light of software, if you are using QuickBooks for your small business accounting, you must have a look at PayTraQer. It automatically syncs all your online transactions into QuickBooks in a snap. With such tools, you will be able to get accurate records for your estimation and loan application.
If you are upto get your start-up off the ground, there are some loans specially offered for that. There are also some other loans available for specific business operations like loans for managing payrolls. So take time and consider your options thoroughly and pick the one that best suits your needs.
Submit your loan application
When you are done making all the decisions, planning and have the necessary documents ready, it is time for execution. Go for it, fill out the paperwork and provide necessary documents. If you follow the given instructions properly, your loan process will be plain sailing. So, get yourself ready and apply your business loan today!
Laila Azzahra is a professional writer and blogger that loves to write about technology, business, entertainment, science, and health.