This is a contributed article from Samantha Novick, a senior editor at Funding Circle.
If your local business needs capital, a business loan is usually the most reliable source of financing. Yet, banks only approve around 13% of business loan applications, which makes scoring a top-notch loan all the more competitive.
Navigating the world of business loans can be tricky, especially for the first time. This is why it’s important to get organized, especially if you’re applying for a loan with a big bank.
If you’re considering financing, this quick-and-easy guide will arm you with all the tips you need to prepare a loan application for your small business.
- 1. Educate yourself on business loans
- 2. Build and Maintain Your Credit
- 3. Organize Your Documents
- 4. Get Your Finances in Order
- 5. Decide Which Type of Loan You Need
- 6. Find Collateral
- 7. Document Your Business Plan
- 8. Choose the Right Lender
- 9. Plan for the Right Time
- Don’t Be Afraid to Ask for Help
- How can I increase my chances of getting a business loan?
- How do I prepare for a business loan?
- What makes a good business loan?
- Is it smart to take a loan out for a business?
- Do banks give loans to startups?
- Do you need a business plan to get a loan?
- Is it hard to get a business loan right now?
- What lenders look for in a business loan?
- Is it bad to borrow money to start a business?
- How many small business loans are denied?
- What do you need for a first time business loan?
- Can you loan yourself money?
- How do billionaires borrow money?
- Can I lend money to my own LLC?
- What banks do millionaires use?
- How do rich avoid taxes?
- What is it called when you put money into your own business?
- 7 Tips To Get Your Small Business Loan Approved – Banks.com
- 8 Factors That Keep You From Getting a Small Business Loan
- 9 Tips for Preparing Your Business Loan Application
- How to Get a Business Loan in 6 Steps – NerdWallet
- Small Business: Tips for Finding the Right Lender for a Loan
- Should You Take Out A Small Business Loan? Tips, Benefits …
- Advice For Small Businesses Seeking Loans – GUD Capital
- 5 Tips For Getting One Of The Best Small Business Loans
- 5 tips to getting a business loan – GovDelivery
1. Educate yourself on business loans
Lenders want to loan money to borrowers they can trust. If they get the inclination that you don’t really understand interest rates or the difference between a term loan and a business line of credit, there’s a chance your application will not be favored.
Do your research and learn the basics. Demonstrating knowledge of business loans will build confidence with your lender, increasing your odds of scoring funding.
2. Build and Maintain Your Credit
Your credit score measures the credibility of your business. It tells lenders if you pay your bills on time, open too many (or too little) credit lines, and utilize debt effectively. The catch 22 is that to secure a loan, you’ll need to demonstrate a history of repaying loans on time.
This means you’ll often need to start off small. If you’re a brand-new business that’s only been around for a few months, then you likely won’t qualify for a big bank loan—however, you’ll probably be eligible for a business credit card. That’s because credit card companies will look at your personal credit score when determining your eligibility.
As you responsibly use your credit card, you’ll build your business credit and improve your credit utilization ratio —both of which will help you score bigger, better loans down the road.
You’re More Than Your Credit Score
Most lenders rely on your credit score to evaluate the credibility of your local business and your trustworthiness as a borrower. But there are some lenders, like Funding Circle, who consider other factors like how long you’ve been in business, your previous experience in your industry, and even your reputation with your customers and community. If you aren’t approved for a business loan, remind yourself that you are more than your credit score.
3. Organize Your Documents
Everything about your business needs to be documented for proof. That includes your revenue, expenses, debts, and assets. You must be able to back these items up with paperwork. Avoid waiting until application time to get organized. By establishing your accounting and bookkeeping practices now, you’ll make the application process smooth and easy.
Consider using a cloud-based bookkeeping tool to organize your business finances. There are free tools (like Sunrise, Wave, ZipBooks, and more) that’ll help manage your income and expenses, send and track invoices, generate financial reports, calculate taxes, and more.
4. Get Your Finances in Order
Get quotes to determine how much you need
Before applying for a business loan, it’s important to determine exactly how much money you need. Securing a loan with excessive funding could cost you unnecessary accumulated interest on top of prepayment penalties. Requesting less money than you need may require you to go back for a second loan or leave a project unfinished—both of which are avoidable with a little research. Get accurate estimates before you speak to potential lenders.
Determine what you can afford
Once you know how much you’ll need, start considering how much you can realistically afford. Look at your revenue and expenses to ensure you can afford an additional monthly payment.
If not, you might need to adjust your loan amount or loan type. For example, while you might not be able to afford a short-term loan, you could still qualify for a merchant cash advance or a business line of credit.
Crunch the numbers, and then review your options again if necessary.
Provide proof of cash flow
You’ll also need to provide proof of cash flow. Lenders will look at your past financial reports, but they also want to see your potential future. Realistic cash flow projections will show your business’s future income and expenses as a result of the loan.
Use your previous cash flow statements to prepare accurate projections. When a lender sees a data-backed plan for their investment, they’ll be more willing to approve your application.
5. Decide Which Type of Loan You Need
Your loan amount, use proceeds, timing, and creditworthiness will impact which type of loan you need. Here are a few popular loan types to consider:
- Term Loan: This is the classic loan option. A term loan provides you with a lump sum of cash that you’ll pay back (with interest) in regular increments until you’ve paid off the entirety of the borrowed funds.
- Short Term Loan: Short term loans are like term loans, just faster and more expensive. You’ll face higher interest rates and shorter repayment terms, but you’ll get money in the bank very quickly.
- Business Line of Credit: A business line of credit is a revolving credit line that gets you access to ongoing capital. When you use your credit line, you’ll only pay interest on the portion you borrowed. Once you repay the borrowed funds, then you get access to the capital again—no need to reapply.
- Business Credit Card: A business credit card works much the same as a personal credit card. Use your credit card to buy now, pay later. It’s a great way to expand your available capital and build your credit score.
- Merchant Cash Advance: Use a merchant cash advance to trade tomorrow’s earnings for cash today. Your lender will provide you with a lump sum of money that you’ll repay with a percentage of your daily sales.
- SBA 7(a) Loan: Small Business Administration (SBA) 7(a) loans are one of the most sought-after business loans. They have large lending amounts, competitive interest rates, and generous repayment terms. They’re challenging to qualify for and notoriously paperwork-heavy, but they’re the best financing small businesses can find.
- Accounts Receivable Financing: Accounts receivable financing (also known as factoring) lets you trade your outstanding invoices for immediate cash. If you just need extra money to cover a slump or pay your own bills, factoring may give you all the financing you need.
6. Find Collateral
Lenders base their decision to lend to you or not based on your level of risk. If they aren’t confident they will get their money back, lenders won’t invest. Collateral helps lower that risk by providing banks with a guarantee in the case that you default on your loan.
Look for things you could provide as collateral on your loan. That could be your business truck, land, or even a personal asset (like jewelry or home equity loans). Providing collateral can be scary—there’s always an element of risk. However, if you’ve followed all the other tips and use your loan responsibly, your collateral should be safe.
7. Document Your Business Plan
Lenders want to know how you plan to use your loan. What will you spend it on? How will the investment help your business? When do you expect to start seeing a return on your investment? A solid business plan will convince your lender that you know what you’re doing and that you’re more than capable of repaying the borrowed funds.
Not every lender will require a business plan, but it’s best to always be prepared by having one ready.t. The additional research and planning will help you strategically use your funds, establish realistic repayment plans, and prepare for worst-case scenarios.
8. Choose the Right Lender
Every lending institution is different. Large banks can provide big loans, but they’re often preoccupied with enterprise clients and have strict eligibility requirements.
Alternative lenders usually provide quick approvals and more lenient requirements, but they compensate for the risk with slightly higher interest rates. Local banks may be your best bet because they allow you to meet in person, develop relationships, and potentially earn some flexibility.
There’s no one-size-fits-all lender—you’ll need to do your research and shop around for loans.
9. Plan for the Right Time
Don’t wait until you need a business loan to start applying. Plan ahead. If you foresee a future financial need, consider getting a loan in advance so that you’re not stuck in long application processes while your business is scrambling for cash. If you operate a seasonal business with regular cash flow fluctuations, get a line of credit to cover any potential slow periods.
Don’t Be Afraid to Ask for Help
As a small business owner, you wear a lot of hats—but sometimes it’s best to delegate some of those responsibilities and focus on what you do best. Don’t be afraid to seek expert advice. Bookkeepers can help keep your financial transactions neat and tidy, while accountants help with your planning, projections, and applications. Professionals can help discover opportunities and raise any red flags if there’s an issue they know lenders will be concerned about.
If you’re in search of a bookkeeper or accountant, Nextdoor can help. Claim your free Business Page and connect with local experts in your community.
Claim your free Business Page to get started on Nextdoor. For resources on how to use Nextdoor to stay connected with your local customers, pertinent news affecting businesses, and more, follow us at @nextdoorbusiness on Facebook.
Samantha Novick is a senior editor at Funding Circle, specializing in small business financing. She has a bachelor’s degree from the Gallatin School of Individualized Study at New York University.
How can I increase my chances of getting a business loan?
5 Ways to Improve Your Odds of Getting a Small Business Loan
- Gather and organize all your business documents. …
- Know how you’re going to use the money. …
- Create a rock-solid business plan and register your business name. …
- Make sure you have good credit. …
- Have a handle on your cash flow.
How do I prepare for a business loan?
Tips for Preparing Your Business Loan Application
- Educate yourself on business loans. …
- Build and Maintain Your Credit. …
- Organize Your Documents. …
- Get Your Finances in Order. …
- Decide Which Type of Loan You Need. …
- Find Collateral. …
- Document Your Business Plan. …
- Choose the Right Lender.
What makes a good business loan?
You’ll want to be in excellent credit standing?think high 600s-plus for a local bank loan. For an SBA loan, too. But, as with all things credit-score related, the higher the better. The best candidates have a very solid credit history, or have worked hard to rebuild credit history if they’ve had past missteps
Is it smart to take a loan out for a business?
Loans help your business grow: Whether your plan is to hire more employees, expand into a new market, offer new products or grow an existing location, your business needs cash to do so. A business loan will cover the upfront costs of expansion, allowing you to pursue profitable growth
Do banks give loans to startups?
So yes, banks do make loans to startups ? provided they demonstrate the ability to repay them. Generally, that means: Strong collateral. Lenders expect borrowers to put up something ? usually their home or other significant asset.
Do you need a business plan to get a loan?
Although some lenders won’t ask for a business plan, traditional lenders typically do. Think of writing a business plan as the price you pay to access the favorable business loan terms and lower interest rates available from banks and SBA-guaranteed lenders.
Is it hard to get a business loan right now?
Is it hard to get a small-business loan? It can be challenging to qualify for a small-business loan without a strong personal score (starting around 700) and a solid cash flow from your business. Those are among common reasons why your business loan application can be denied.
What lenders look for in a business loan?
They’ll consider household income, business revenue, cash flow, outstanding debt, unused credit lines, and the amount of money the owner has personally invested into the business. All these variables will help lenders calculate the ability for an owner to repay the loan.
Is it bad to borrow money to start a business?
Borrowing funds to pay start-up costs benefit business owners because they do not have to rely on personal credit, savings and credit cards to fund new business purchases. Borrowed funds eliminate personal financial risks business owners take on when starting a new operation.
How many small business loans are denied?
The NSBA Small Business Access to Capital study found that 20% of small business loans have been denied due to poor business credit.
What do you need for a first time business loan?
You’ll want to have a great personal credit score, strong business financials (or at least an impressive business plan,) as well as ample collateral to qualify for a first-time business loan from a bank. If you have a few years in business and solid annual revenue, you’ll be even more likely to qualify.
Can you loan yourself money?
The IRS allows you to borrow up to $50,000 or half the value of your account, whichever is less, although your employer may or may not allow loans. The benefits of a loan are that you don’t have to pay taxes or penalties on it, and you pay back the interest to your own account.
How do billionaires borrow money?
Two effective ways to borrow are a line of credit secured by an investment portfolio and margin loans against a brokerage account. Before using debt, however, investors must carefully consider how much leverage they can comfortably assume, from both a balance sheet and cash flow perspective.
Can I lend money to my own LLC?
There is no limit to the amount of money a member can loan his own company. It is extremely important for the lender and the LLC to maintain separate bank accounts, according to Fit Small Business.
What banks do millionaires use?
Bank of America, Citibank, Union Bank, and HSBC, among others, have created accounts that come with special perquisites for the ultra-rich, such as personal bankers, waived fees, and the option of placing trades. The ultra rich are considered to be those with more than $30 million in assets.
How do rich avoid taxes?
The U.S. system taxes income. Selling stock generates income, so they avoid income as the system defines it. Meanwhile, billionaires can tap into their wealth by borrowing against it. And borrowing isn’t taxable.
What is it called when you put money into your own business?
Startup capital is the money raised by an entrepreneur to underwrite the costs of a venture until it begins to turn a profit. Venture capitalists, angel investors, and traditional banks are among the sources of startup capital.
7 Tips To Get Your Small Business Loan Approved – Banks.com
7 Tips To Get Your Small Business Loan Approved Getting a small business loan approved is a decision only a lender can make. However, it is possible to influence your credit history and improve your chances of getting approved by the lender of your choice. If you are counting on a loan to take your small business to the next level, the following tips will help you get approved for the loan you need. Tips To Get Your Small Business Loan Approved 1. Tidy Up Your Personal Credit What does your personal credit have to do with getting a small business loan? If you don’t have business credit – or if your business credit is poor – you’ll be leaning on your personal credit to get approved. If you’re hoping to get approved for a loan through the Small Business Administration (SBA), your personal credit matters. SBA loans are popular; the SBA guaranteed more than $28 billion to entrepreneurs in 2019. However, the SBA has strict requirements. For example, you need strong personal credit plus substantial business revenue to qualify. You won’t qualify for an SBA loan if you’ve defaulted on a federal student loan or a government-backed mortgage. While it is not guaranteed that all lenders will take personal credit into consideration in the absence of business credit, some will. It will not hurt to tidy up your personal credit before applying for loans. Even if lenders do not ever look at your personal credit, your efforts will still be beneficial. Review Business Lenders Learn how National Business Capital can help you access financing solutions for your small business in a very easy way. Learn how Biz2Credit helps small business owners get financing to grow their business using fast approval process and latest technology. Learn more about the Mulligan Funding loan expert team, and how to get a fast approval on your small business loan. 2. Create a Rock-Solid Business Plan Lenders want to know what you’ll use their money for, and they also want to see that you’ve got a strong ability to repay the loan. A business plan is the most common way lenders obtain this information. Before applying for loans, create a rock-solid business plan that clearly demonstrates how your business will have the cash flow required to cover operational expenses plus your loan payments. When a lender can see this information clearly, they will have more confidence in lending you money. 3. Reduce Your Debt-to-Income Ratio On both the business and personal sides, reduce your debt-to-income ratio as much as possible before applying for a loan. This is one of the most basic factors lenders look for. If your debt is too high compared to your income, lenders see that as a sign that you might not make your payments. 4. Keep Your Daily Bank Balance As High As Possible There are a couple of reasons to keep your daily bank balance as high as possible. Some loans are approved based on a daily bank balance rather than business income. Also, lenders want to know you have cash on reserve to make your loan payments. 5. Boost Business As Much As Possible Prior to Applying Lenders are more likely to approve loans for small businesses that are generating revenue. If you are just starting out, you won’t have the revenue to boost. However, if you are already in business, spend some time boosting your sales as much as you can. You can boost revenue by: Consulting with a professional marketing firm to launch a new campaignRunning PPC ads on a regular basis and then using retargetingCapturing emails and running an email marketing campaign to nurture leads until they become paying customers There is always something you can do to boost business revenue and show lenders you have the ability to repay a loan. Review Business Lenders Learn how National Business Capital can help you access financing solutions…
8 Factors That Keep You From Getting a Small Business Loan
8 Issues Keeping You From Securing a Business Loan – businessnewsdaily.comPoor credit history and low cash flow can prevent small businesses from securing loans.Before applying for a business loan, make sure your financial documents are in order and that you understand what lenders need from you.A good business plan makes your business attractive to lenders, giving you a better chance of getting a loan. Business loans can be essential to launching a startup or expanding an existing company, with funds often used to secure inventory, purchase equipment, rent operational space, hire employees or cover a host of other expenses. However, business loans can be difficult for new companies to get. Be aware of these eight roadblocks that can keep you from getting approved for a small business loan. [Learn More: See Our Top Picks for The Best Business Loans.] 1. Poor credit historyCredit reports are one of the tools lenders use to determine a borrower’s credibility. If your credit report shows a lack of past diligence in paying back debts, you might be rejected for a loan.Paul Steck, COO of Spread Bagelry, has worked with hundreds of small business franchisees, many of whom have bad personal credit as a result of illness, divorce or other extenuating circumstances.“Sometimes, very good people, for reasons beyond their control, have credit issues, and unfortunately, that’s a real barrier to entry in the world of small business,” said Steck.It is difficult to qualify for a small business loan with a credit score lower than 700. “A score of 720 seems to be the magic number, above which your likelihood increases dramatically and below which it decreases dramatically,” said Brian Cairns, founder of ProStrategix Consulting, which provides a host of services to startups and small businesses.If your score is under 700, Cairns recommends you focus on fixing it if you can. Begin by checking your personal and business credit scores to ensure they are accurate. If you find any errors, correct them before beginning the loan application process. You can order a free personal credit report yearly from each of the three credit-reporting companies on AnnualCreditReport.com or individually from each credit-reporting agency – TransUnion, Equifax and Experian. To check your business credit score, contact Equifax, Experian and Dun & Bradstreet.Additionally, you should build a strong personal credit score and drive down any debt prior to applying for a business loan.“The better your personal finances are upfront, the more likely you are to be approved for a good loan option,” said Jared Weitz, CEO and founder of United Capital Source, a lender for small and midsize businesses. “Most loans require some form of down payment, and this is typically varied based upon the borrower’s financial history and the collateral put up for the loan,” Weitz added. “Based on this, most loans range from zero to 20% down payment for the loan.” If your credit is still far from ideal after you take these steps, consider nontraditional financing options – which tend to place less emphasis on credit scores – before giving up on getting a loan. “Angel investors, or individuals interesting in backing the business in exchange for a share in the eventual revenue, can be a way to help get your business off…
9 Tips for Preparing Your Business Loan Application
9 Tips for Preparing Your Business Loan Application This is a contributed article from Samantha Novick, a senior editor at Funding Circle. If your local business needs capital, a business loan is usually the most reliable source of financing. Yet, banks only approve around 13% of business loan applications, which makes scoring a top-notch loan all the more competitive. Navigating the world of business loans can be tricky, especially for the first time. This is why it’s important to get organized, especially if you’re applying for a loan with a big bank. If you’re considering financing, this quick-and-easy guide will arm you with all the tips you need to prepare a loan application for your small business. 1. Educate yourself on business loans Lenders want to loan money to borrowers they can trust. If they get the inclination that you don’t really understand interest rates or the difference between a term loan and a business line of credit, there’s a chance your application will not be favored. Do your research and learn the basics. Demonstrating knowledge of business loans will build confidence with your lender, increasing your odds of scoring funding. 2. Build and Maintain Your Credit Your credit score measures the credibility of your business. It tells lenders if you pay your bills on time, open too many (or too little) credit lines, and utilize debt effectively. The catch 22 is that to secure a loan, you’ll need to demonstrate a history of repaying loans on time. This means you’ll often need to start off small. If you’re a brand-new business that’s only been around for a few months, then you likely won’t qualify for a big bank loan—however, you’ll probably be eligible for a business credit card. That’s because credit card companies will look at your personal credit score when determining your eligibility. As you responsibly use your credit card, you’ll build your business credit and improve your credit utilization ratio —both of which will help you score bigger, better loans down the road. You’re More Than Your Credit Score Most lenders rely on your credit score to evaluate the credibility of your local business and your trustworthiness as a borrower. But there are some lenders, like Funding Circle, who consider other factors like how long you’ve been in business, your previous experience in your industry, and even your reputation with your customers and community. If you aren’t approved for a business loan, remind yourself that you are more than your credit score. 3. Organize Your Documents Everything about your business needs to be documented for proof. That includes your revenue, expenses, debts, and assets. You must be able to back these items up with paperwork. Avoid waiting until application time to get organized. By establishing your accounting and bookkeeping practices now, you’ll make the application process smooth and easy. Consider using a cloud-based bookkeeping tool to organize your business finances. There are free tools (like Sunrise, Wave, ZipBooks, and more) that’ll help manage your income and expenses, send and track invoices, generate financial reports,…
How to Get a Business Loan in 6 Steps – NerdWallet
How to Get a Business Loan in 6 StepsGetting a business loan doesn’t have to be a painful process — if you do a little homework. You can increase your chances of approval by understanding your business’s qualifications then finding the small-business loan that fits your needs.Here’s how to get a business loan in six simple steps.How much do you need? with Fundera by NerdWalletWe’ll start with a brief questionnaire to better understand the unique needs of your business.Once we uncover your personalized matches, our team will consult you on the process moving forward.1. Decide what type of loan you need to fund your businessWhich type of business loan is right for you depends on what you’re hoping to accomplish. In general:If you want to finance a large purchase or business expansion: Traditional term loans are lump sums that you pay back over time with interest and often have high borrowing maximums — SBA loans can reach $5.5 million, for example. Many lenders also offer specific products to fit a growing company’s needs, such as loans for equipment or vehicle purchases.ProgramLoan sizePurposeSBA 7(a) loansUp to $5 million.Working capital, expansion and equipment purchases.SBA Express loansUp to $500,000.Fast funding for working capital, expansion and real estate and equipment purchases.SBA 504 loansUp to $5.5 million.Purchase long-term, fixed assets like land, machinery and facilities.SBA microloansUp to $50,000.Working capital, inventory, supplies, equipment and machinery.SBA disaster loansUp to $2 million.Repair physical damage due to a declared disaster and cover operating expenses.SBA Community Advantage loansUp to $350,000.Normal business purposes; cannot be used for revolving credit.SBA Export Working Capital loansUp to $5 million.Working capital to support export sales.SBA Export Express loansUp to $500,000.Expedited funding to enhance a business’s export development.SBA International Trade loansUp to $5 million.Long-term funding to expand export sales or modernize to contend with foreign competitors.If you need funds for day-to-day expenses: Business lines of credit are a flexible kind of funding that lets you tap into financing as you need it to cover expenses such as payroll or unexpected repairs, offering a useful safety net.If you’re looking to fund a startup: It can be tougher for entrepreneurs to get a traditional business loan, but business credit cards and personal business loans can be good options if you haven’t been in business long enough to qualify for a line of credit or term loan.2. Determine if you qualify for a business loanYou can get a business loan from a number of places, including banks, online lenders and microlenders. Answer these questions to help determine at which type of lender you’ll meet the eligibility requirements to qualify for a small-business loan:What’s your credit score?You can get your credit report for free from each of the three major credit bureaus: Equifax, Experian and TransUnion. You can also get your credit score for free from several credit card issuers and personal finance websites, including NerdWallet.Banks prefer to offer their low-rate business loans to borrowers with credit scores in the good and excellent ranges, or 690 and above.How long have you been in business?You need to have been in business at least one year to qualify for most online small-business loans and at least two years to qualify for most bank loans.Do you make enough money?Many lenders require a minimum annual revenue, which can range anywhere from $50,000 to $250,000, for business loans and lines of credit.If your revenue isn’t high enough to qualify for those loan products, consider looking into business credit cards or SBA microloans.3. Determine what payments you can affordLook carefully at your business’s financials — especially cash flow — and evaluate how much you can afford to apply toward loan repayments each month.Your total income should be at least 1.25 times your total expenses, including your new repayment amount, says Suzanne Darden, a finance specialist at the Alabama Small Business Development Center.For example, say your business’s income is $10,000 per month. That’s 1.25…
Small Business: Tips for Finding the Right Lender for a Loan
How to Assess Whether a Small-Business Loan Will Work for YouIllustration: Gwendal Le Bec for Bloomberg BusinessweekOctober 8, 2021, 12:00 PM UTCIf you’ve launched a small business, you know that offers of business financing follow you like a shadow: Myriad proposals from would-be lenders with goofy names arrive via e-mail, on banner ads, and in your accounting software. You’re right to be skeptical. “Don’t just trust what the lender says on its website,” says Rob Stephens, CPA and founder of financial planning company CFO Perspective. “Companies are constantly popping up that don’t last. You want a lender who will provide great service throughout the life of your loan.” (And not make off with your Social Security number or the contents of your retirement fund.) We talked to finance experts about how to find the smartest loan for your business.Start with the SBA. You won’t go wrong checking the Small Business Administration’s website. Government loans frequently offer lower rates and extended payment terms—though getting one can be slow and may involve lots of bureaucracy, says Keith Chulumovich, CPA and managing director at O’Keefe financial consulting company. “Many programs take significantly longer than banks,” he says. “And the qualification requirements can be overly burdensome and time-consuming.”
Should You Take Out A Small Business Loan? Tips, Benefits …
Should You Take Out A Small Business Loan? Tips, Benefits & More Why Do Small Businesses Need Loans? Using Loans to Stimulate Small Business Growth As a business owner, you have several options when it comes to getting financing for your company. You can use your own savings to support your business. You can find investors to give you money in exchange for an ownership share in your company. Or, you can apply for a business loan from a bank or another type of financial institution. You may be wondering if you have to pay back small business loans. When your business takes out a loan, it is responsible for paying back the amount borrowed, plus interest, on a set schedule. Is it a good idea to take out a business loan? Depending on your company’s goals and current financial situation, the answer might be “yes.” Business owners must ask themselves how they’ll finance business growth and what other areas may require additional capital. What Do Small Business Loans Cover? Getting a small business loan can provide your company with the funding it needs to get started, expand or cover day-to-day expenses. Compared to other financing options, there are some benefits to a business loan. If you are not sure if a loan is right for your company at the moment, learn more about smart reasons to get a business loan, the advantages of doing so and the loan options available to small businesses. Why Do Small Businesses Need Loans? Why should you get a business loan? The reasons a business needs a loan range from getting the company up and running to allowing it to grow profitably. A loan can help your company achieve its goals or provide the financial cushion it needs to take the next steps. If you aren’t sure whether taking out a loan is the right move for your business, consider some of the more common reasons companies apply for financing. 1. To Help With Expansion Expansion can take many different shapes. For some companies, expanding means opening up a new retail location in a different part of town, a different part of Pennsylvania or in a different state entirely. For other companies, expansion can mean renting more office space and hiring more employees. In some cases, expanding means introducing a new product or service. What each example has in common is that all of them typically require cash to get going. If you want to open a new brick-and-mortar location, your business will need financing to rent the building, purchase furniture for it and stock up on inventory. If you need more office space, your company also needs to pay the rent and the salaries of the additional team members. You might need funds to conduct research or create a new product or service. Before your business takes out a loan for expansion, it’s a good idea to run the numbers to see if this type of growth will increase your revenue. Ideally, you will be able to pay back the loan with ease after your company has opened a new location or added a new product line. 2. Establish an Emergency Fund Emergency funds aren’t only for personal use. Having cash in a savings account to cover unexpected expenses is also a good idea for businesses. In many instances, cash reserves can be what helps a business survive from one year to the next. If your company has a lean period or if business drops off, you can tap into your emergency savings to keep things afloat until business picks up again. Getting a business loan can be the quickest way to build a decently-sized business emergency fund. Instead of having to tap into your own personal savings or put away a small amount over several months and years, you can start with a fully-funded…
Advice For Small Businesses Seeking Loans – GUD Capital
Advice For Small Businesses Seeking Loans – GUD Capital The process of obtaining a business loan can be tricky if not downright confusing. The goal of the business loan is provide your company with the financing it needs to handle its operations. Getting the wrong loan could put you in a position where you eventually struggle to repay the debt. So the goal of the business lending process should be to find the right business loan for your company’s needs. With well over 5,000 lenders offering over 12,000 business loan products, the process of getting a loan isn’t easy. In this article we will focus on tips to help a borrower navigate the business lending process.
5 Tips For Getting One Of The Best Small Business Loans
5 Tips For Getting One Of The Best Small Business LoansWhen it comes to small business lending, SBA loans are hot. In fact, in fiscal year 2019, the U.S. Small Business Administration (SBA) guaranteed over $28 billion to entrepreneurs who otherwise would not have had access to capital to start, grow, or expand their small businesses. Business loan approval, in general, is the highest it’s been post-recession. SBA loans appeal to entrepreneurs because they tend to have longer payment terms and lower interest rates than many other types of business financing and loans. But, like any low-cost business loan, getting an SBA loan can seem overwhelming. Don’t let it be. “The biggest misconception is that there’s a lot of paperwork, but this is just a regular business loan,” says Bob Coleman, publisher of The Coleman Report, the leading SBA intelligence report for lenders. He adds, “The bank deals with the government, not the entrepreneur.” When it comes to small business lending, SBA loans are hot.© denisismagilov- Adobe Stock Here are five things you should know to help land one of these coveted loans: 1. Do your homework The more you know about your financial situation (i.e., your credit history, credit scores, risk factors) as well as your industry and competition, the better positioned you will be to apply for—and get approved for—that SBA loan. Kathryn Primm, DVM, CVPM is owner/veterinarian of Applebrook Animal Hospital, and she took out an SBA loan to remodel a residence and equip it as a functional animal clinic. “I did a lot of demographics studies myself before even applying. I knew it was a low-risk loan because I know what a hard worker I am, and I know what a good veterinarian I am,” she says. “The area was able to support a veterinary hospital as well, according to my research.” Primm was able to pay off her loan in five years. “The SBA was like my ‘behind the scenes’ investor and I bought them out!” she says. It’s also helpful to understand how SBA loans work and familiarize yourself with basic requirements. A free guide to SBA loans is available from SCORE, a resource partner of the SBA. The SBA doesn’t make loans—it guarantees them. Each lender must meet the SBA’s minimum requirements, but beyond that a lender may have its own requirements as long as it doesn’t discriminate on a prohibited basis. 2. Know how much you need There are several different SBA loan programs, each with a specific focus. The 504 loan is for land, building, and renovations, for example, while Export Express loans help small businesses develop or expand their export markets with streamlined financing. The most popular, by far, is the 7(a) loan program, which allows you to borrow up to $5 million, with a 10-year repayment period (loans for equipment or real estate may be extended to 25 years). Maximum SBA loan amounts Up to $5 million: 7(a), CAPLines, Export Working Capital loans, International Trade loans, 504 loans.* Up to $2 million: Disaster loans Up to $500,000: Export Express loans Up to $350,000: 7(a) loans and SBA Express loans Up to $250,000: Community Advantage Up to $50,000: Microloans *Note there is no project size limit for 504 loans but the maximum SBA debenture (loan amount) is generally $5 million. Certain small manufacturers or energy projects may qualify for up to $5.5 million. If you haven’t already, write out a budget for what you’ll do with the money if you secure a loan. Not only will this help you understand how that money can best benefit your business, but it may also come in handy when talking to a lender who, naturally, will want to know you have a plan for the funds. 3. Know your numbers Good credit and solid financials are often key to getting an SBA loan. Chester Gordon is…
5 tips to getting a business loan – GovDelivery
5 tips to getting a business loan In this newsletter, you can learn more about: 5 tips to getting a business loan Attend a live webinar to learn about SBA loans Upcoming Events 5 tips to getting a business loan There comes a time when almost every business needs additional capital, either at startup, expansion, or purchasing a building. Here is our top 5 tips to know when you’re considering an SBA loan, or any outside funding for your business: Be prepared: Have a written business plan with complete financial projections. Be ready to discuss your strengths and weaknesses and how you will overcome obstacles. Be Realistic and Reasonable: Know exactly how much money you need, what you will use it for, and how it will help your business. Show Your Passion: Don’t be afraid to to show your passion for your business and your craft. It helps lenders connect with you, your business, and your request. Shop Around: Don’t be discouraged if a lender says no. Ask why they said no and then ask another lender. When you do get an offer, take it to another lender or two to get the best deal you can. Use Your Resources: Take time to learn about different funding options available. Attend an SBA workshop or get individual advice from our network of resource partners. Attend a live webinar to learn about SBA loans Join staff from the SBA Seattle District to learn valuable information on borrowing money to start or grow your small business. The SBA offers a wide range of loan programs whether your business needs $500 or $5 million, our network is here to help. Click a link below to register for that event: Feb. 25 | Buying a Business Using SBA Loans Mar. 25 | Debt Refinancing with SBA Loans Apr. 22 | Meeting Your Company’s Working Capital Needs with a SBA Loan May 27 | Buying Commercial Real Estate Using SBA Loans Mar. 11, Apr. 8, May 13 | SBA Loans 101: What Borrowers Should Know Upcoming Events Friday, Feb. 18 9:30 a.m. | Virtual Square One Work For Yourself: Redmond Saturday, Feb. 19 9 a.m. | Successfully Starting a New Business Tuesday, Feb. 22 9 a.m. | Virtual Square One Work for Yourself: Auburn 1 p.m. | Small Business Flex Fund Webinar * Wednesday, Feb. 23 8 a.m. | What’s Your Business Worth 1 p.m. | Marketing Part 2: Pricing Your Product or Service to Sell & Getting Online Thursday, Feb. 24 10 a.m. | Creating a Quick Business Plan in Three Hours 10 a.m. | L&I Essentials for Business Webinar 11:30 a.m. | Business Expert Session: Detangle your Digital Office Friday, Feb. 25 10 a.m. | Buying a Business Using SBA Loans 1 p.m. | Tax Saving Strategies for Small Businesses Monday, Feb. 28 10 a.m. | Building a Formal Business Plan 4 p.m. | Tax Readiness Workshop Tuesday, Mar. 1 11 a.m. | Understanding the Employee Retention Tax Credit Wednesday, Mar. 2 8 a.m. | Getting My Business Insurance Right 9 a.m. | Intro to Business 10:30 a.m. | Virtual Launch & Grow: Lynnwood (8 week series) Thursday, Mar. 3 8:30 a.m. | Coeur d’Alene, ID – Digital Strategy for Success (Accelerator Series #4) 11 a.m. | Are You Ready to Start a Business? * SBA’s participation or support is not an endorsement of any product, service, or entity.