Getting a loan is among many challenges of running small business. Some new entrepreneurs require outside financing to start or grow their existing business. Although, finding, applying and getting approved for small business loans can be tough, but the more you’re prepared, the more it is better. I will take you through steps of getting small business loan. Here’s what you need to ask yourself.
1 Why Do You Need This Loan?
Lenders gonna ask you these questions and your answer will likely to fall into any of these categories.
- To start a new business
- To grow your business
- To manage day to day expenses
- To have a safety cushion
2 Decide Which Loan Will Be Right For You
If you’re starting a new business, it’s virtually impossible to get a small business loan in your first year. Your best option could be to rely on business credit cards, borrowing from family or friends or personal loans.
If your wish to grow your business by shifting to a new location, adding a new service or product or may be buying a large equipment, you will require a term loan. A lump sum of cash which needs fixed payments.
If you don’t need cash instantly, but would like to have a safety cushion for any kind of emergency, you will require to get a line of credit with lowest rate possible.
3 Find The Best Type of Small Business Lender
You can get small business loans from many places such as banks, online lenders and nonprofit microlenders. These lenders offer line of credit, term loans and account receivable financing.
Many of you know that small business have difficult time getting approved because of lower sales volume and cash reserves, and many beginners come up empty handed. Usually it takes longer to getting funded probably between two to six months.
4 Find Out Whether You Qualify or Not
Your credit score is one factor which will determine that what kind of loans you will qualify for. You can get your credit report from three major credit bureaus once a year and FICO score for a small amount of fee.
In addition to your credit score, lenders are going to consider how long your business is running. You need to have been in your business running at least one year for qualifying for small business loan.
5 Now Gather Your Documents
Once you have examined your options, it’s time that you apply for the loans which fit your business financing requirements and the one you qualify for.
Depending on the type of lender, you will be need combination of following documents
- Personal and business tax returns
- Personal and business bank statements
- All business legal documents
- Business financial statements
The Bottom Line
Not all small business loans meet your business requirements. Although, to get the best loan, determine your options and understand your business needs based on the intention of the money usage, what you qualify for and maximum how much you can afford to pay.
And, if you ever need help, you can also speak to a business consultant. Because, a professional business consultant can speak objectively and can assist you to find a loan which is best suited for your business requirements.