Whether you’re working on launching a startup or expanding your existing business, there’s often a need for business loans. Sometimes you find yourself caught between being able to cover expenses with enough cash on hand and needing to make a larger purchase that you wouldn’t be able to save up for in time. You’ve got payroll costs every week, utilities and gas to pay for monthly – and then there’s the pressing issue of what to do with each new client that comes your way. In many cases, loans can be obtained quicker than applying for lines of credit and require lower rates of interest.
Understanding how to get a business loan can be daunting; you know what you need, but how do you get it? While there isn’t a definite set of rules that apply to every business, these three steps can help you figure out what you need to do before you take the plunge and apply for a business loan.
Decide What Type of Business Loan You Require
Most lenders will ask you why you require a business loan. Your answer will determine what type of business loan will work well for you. Before you get in touch with a lender, determine which of the following types of business loans you need.
Traditional or Small-Business Loans
These loans typically have pretty high borrowing maximums. Fortunately, many small-business/ traditional lenders offer specific loan products that suit a growing business’ needs.
Startup Financing
Lenders who offer these loans will usually require cash flow to support the repayment of the loan, so startups in the first year may not qualify for this loan.
A Business Line of Credit
This type of loan is perfect for businesses that need funds to manage their day-to-day expenses.
Determine if Your Company Qualifies for A Loan
To do this, you’ll need to look up your current credit score, check your financials to know if you’re making enough money, and research the eligibility requirements of different lenders. Keep in mind that most lenders require business owners applying for a loan to have a minimum annual revenue and to have been in business for a certain period of time.
Work out How Will You Repay the Lender
It’s crucial that you take a look at your financials and evaluate how much you can afford to pay back to the lender every month (rather than receiving the loan and then figuring out how to repay the lender). Some lenders may need you to make daily repayments, so you’ll need to take this into consideration as well.
You can now proceed to compare loans and loan offers from different lenders. Then, review the terms and conditions of different loans and pick the one that works best for you.
