Guidelines on Obtaining Small Business Loans
Over the years, the lending industry has evolved and flourished to provide better options to anyone who needed a little boost on their business. Whether you are working on your start-up business or the expansion of your capital and merchandise, getting the best deal on small business loans helps a lot.
A business loan is a financial assistance extended to businesses through the creation of a debt. The debt created, in turn, will be paid on a regular basis with added interest and within a fixed period of time. The main purpose of getting a business loan is primarily to support a business that is about to start or an established business that is working on an expansion.
Small businesses help improve the economic standing of countries. It is frustrating for a small business owner to undergo a loan application process that is long and complicated.
While it is true that most small businesses do not meet the criteria to be granted a loan, this should not lead to frustration or you giving up on your business goals. Here are guidelines that small business owners should consider before applying for a business loan:
- Know if you really needed the loan
Study the financial status of your business. You may need to check your annual revenue. If your revenue is more than your expenses and payables, it is more likely that you can afford to pay for the monthly payments of your loan.
- Know loan amount that you need
Some business owners tend to borrow more than they should. This is alright, but this will reflect on your monthly payables as well. You borrow more and you pay more.Sit down with your accountant and work out the most optimal amount that you should borrow. You are borrowing to grow or expand your business and not create a reason for your business to go south.
- Know what you are getting into
Small business loans are financial loans that should be repaid with interest. In some cases, lenders may charge penalties or late fees. Like any other loans, it involves a contract that must be adhered to.Consult your financial adviser and accountant to know if your business will be capable of the additional monthly expenses to cover the loan. It is also best to consult business lenders to learn more about interest rates, penalties, late fees, and monthly amortizations.
- Know the types of small business loans
There are various forms of financing agencies that assist small businesses. Some types of small business loans include term loans, business line of credit, merchant cash advances, SBA loans, business credit card, and personal credit or loan.Every small business loans offers different interest rates, terms, and conditions. Do not settle for the first loan offer you get. It is best to compare the deals they offer and decide the best option that will benefit your business.
How to Qualify for Small Business Loans
Applying for a business loan can be fast and easy. There are 3 basic requirements that you need to be ready for.
First, your credit score. The most important factor that lending institutions consider is your credit score. Through your credit score, lenders will know how wisely you make financial decisions. The better the credit score, the better chances of getting the best loan deal.
Second, the length of business years. One of the first questions you would be hearing from loan agents is the question, “how long have you been in this business?” Loan agencies prefer to extend financial aid to those who are in the business for at least 1 to 2 years. This supports the idea that your business surpassed the risks that typically happens during the first year of being in business.
Third, your revenue. In most cases, lenders would qualify your monthly revenue to see if the monthly amortization of the loan fits the monthly budget of your business. A small percentage of the revenue will be taken into consideration to cover monthly payment and interest of the loan.
When applying for small business loans, meeting these three requisites can give you an edge in getting better loan deals. Contact your loan specialist today and boost the future of your business!