Every business, at some point, requires financial help. Determining where and how to get that help is a crucial step to launching your business forward. Loans are a very popular option for financing since they offer long-term repayment structures and reasonable interests rates; however, with so many lenders out there, getting started seems to be overwhelming.
Here are five steps to help you get moving on your financial journey.
1. Assess Your Situation
Before jumping into lenders, look over what your business needs. Is getting a small business loan necessary? Would a credit card be more useful? Can you afford to add monthly loan payments to your operations budget? Do you have the credit (business and personal)? Do you have collateral? Are you willing to put up said collateral?
Take a moment to sit down and work through all of the ends and outs of applying for a small business loan and where you and your business stand within that process.
2. Assess Financing Options
If you are a relatively new business owner, qualifying for a small business loan will be very difficult as many lenders have minimum revenue requirements as well as tenure thresholds (at least two years). If you are seeking financing to cover your day-to-day operations, a business line of credit may be better suited for your business. They carry some of the best interest rates and provide the flexibility to be used as needed when needed. Businesses that are looking to grow or expand should look into SBA loans. Although these small business loans have a much longer turnaround time, the rates and repayment terms are unbeatable.
3. Compare Lenders
Conventional lenders, banks, and credit unions are best for businesses who have excellent credit, outstanding bookkeeping records, proof of income/revenue and are okay with waiting a few weeks for approval. Online lenders are a fantastic option for small businesses who lack collateral, are just getting started, or need quick access to funds.
All lenders will look at income, inventory, and possible collateral and unless you are a well-established business with business credit, your personal credit and assets will be factored into the vetting process for your small business loan. Even if no business collateral is assigned, all small business loans are sealed with a personal guarantee from the business owner.
4. Gather and Refine Your Documents
Preparing to apply will ensure a smooth process. Lenders will ask you for a variety of documents including, but not limited to: tax returns (personal and business), bank statements, financial records, legal documents (articles of incorporation, etc), and your business plan.
When applying for a small business loan it’s a good idea to update your business plan. Lenders should be able to see where the money is going, how it’s going to be used, and how it would impact/improve your business. Lenders want to see that you’ve thoroughly thought through the process.
5. Apply for the Best One
Unlike college applications, it is not a good idea to apply for all of the loans you may qualify for. Instead, choose one loan and lender that suits your financial needs, within your budget and apply for that loan. Ideally, the perfect lender will offer the lowest interest rate with the most reasonable and affordable repayment terms.
Triport provides a wide range of small business loans to entrepreneurs nationwide. Contact our team to get the financing you need.