Small-business loans are important for the growth of a small business, but obtaining them can provide major obstacles for those seeking the additional capital.
Further, during the pandemic it has become increasingly important for many businesses to obtain a small business loan to remain viable and business owners look about to see how to raise a loan from one of the many lenders in the market.
There are a variety of lenders like the Small Business Administration and others who can provide working capital loans and the financial support that businesses need.
What Sort of Small-Business Loans Can be Raised?
Small business loans come in various shapes and sizes and it is important to understand what is best for your business requirements.
Business loans come in many forms and deciding just which is the appropriate one is important. Among the different loans are the following –
Term loans, which is a business loan that has both a fixed term and a fixed repayment amount with payments including both principal and interest.
Invoice financing, which provides cash flow relief for businesses who are awaiting payment on invoices that have been rendered. This involves ‘selling’ invoices at a discount.
Lines of credit, similar to credit card facilities that permit the business to buy new stock, equipment or capital investment, as fluctuations occur. These will be limited by a maximum amount permitted to be borrowed.
Cash advances, which provide lump sum payments based on future sales for the business where the business must pay the amount of the loan together with fees. They can be expensive and with fixed transfers that may occur daily or weekly.
Property loans, which are mortgage loans to finance, refinance or develop commercial property or other property interests.
Franchise loans, used to pay for operating expenses and franchise-related costs like marketing or franchise fees
Business lines of credit. Business lines of credit are very similar to credit cards and can be used to purchase inventory or equipment, invest in marketing, or manage fluctuations from seasonal sales. They have a maximum limit you can borrow and repay. You’ll be charged interest for the amount of money you draw, not on the maximum limit.
Equipment loans. Equipment financing is a type of term loan that can be used to purchase and spread out the cost of a large piece of machinery or equipment for your business. Usually, the equipment serves as collateral for the loan.
Strategies To Obtain Business Loans
You should focus your lending intentions upon the requirements for eligibility, including the costs and various options available for the loans when working out which may be best for your business. If you focus on these important factors (outlined below) you are likely to gain approval with terms and costs that are acceptable to your.
Therefore, we are sharing the top ten strategies that you can use to make sure you get loans for your small business easily.
- Prepare a Quantifiable Payback Strategy
Whenever you go to a loan company, they expect you to come up with a payback strategy of your own. This is not only to give you a comfortable payment option, but it also serves as a way of evaluating your preparedness for paying the money back and your overall business acumen.
- Make Sure You can Provide Personal Guarantee
Being a small business means that you may not always have sufficient assets in your business to guarantee your loan. In that case, you may be required to put something from your assets up as a guarantee against the loan. The lender will never give you a loan without this guarantee.
- Be Completely Honest About your Finances
Always tell the truth to the loan company regarding your finances, regardless of how good or bad they are. Lying about your finances to secure a loan can turn out to be a huge mistake if the loan company finds out (and they do in most cases). It will affect your credit rating severely and has no long- or short-term benefits.
- Come up with a Realistic Loan Amount
When figuring out the loan amount you need to get from the lending company, you must figure out a realistic number. Thinking that you can get whatever amount you request is naïve and lacks the business focus you need to get the funding your business requires.
Carefully analyze your business expenses and consider how much your business can afford in terms of repayments by working out your debt servicing ability.
- Be Prepared to Spend Your Own Money
Getting the full amount that you need may not be possible and there is a chance that you will be given the option to go for a smaller loan. We highly recommend that you take it and complete your requirement using your personal funds.
- Always Keep your Business Plan Handy
The lender will always ask you to share your business plan so they can evaluate if your demands are based on something real and quantifiable. Therefore, having a properly prepared business plan is extremely important to show the loan company how you intend to spend the money.
- Stay Informed About Financial Concepts
To make sure you do not end up agreeing to bad loan terms, you should learn all the basic concepts revolving around loans. This will help you review the offers you get from loan companies in a more informed manner.
- Do not Expect Help Related to your Business
The only thing you will get from the loan provider is the money you need for your business. Do not expect them to give you any input regarding making your business successful. In fact, if you show them incompetence, they might not even give you the loan.
- Try Finding Grants That You May be Eligible For
Many businesses are also eligible for grants and that saves them from getting loans. Always check if you have that eligibility as well and get the grant if you can.
- Go Through the Terms and Conditions of the Loan Thoroughly
Read through the terms and conditions shared by the lender for the loan and make sure you do not agree to anything that could come to bite you later. You should never be in such a rush to pick up any form of business loan without fully understanding what the terms and conditions actually mean, which may well include seeking appropriate professional guidance. Don’t avoid seeking help if required.
With the strategies shared here, you can have a solid chance of grabbing a good loan, and that too with reasonable terms and conditions. Do let us know what kind of loan you went for and how this guide helped you out. Remember too that other options exist for business lending, such as various local resources for small businesses that provide options for loans, such as SBA District Offices, Score chapters, Veteran’s Business Outreach Centers and Women’s Business Centers. Such resources often provide assistance, advice, financial assistance and other resources that you should be aware of.
However ensuring you have your information and objectives aligned is key to securing a loan your business requires and can succeed with.
Source: Seek Capital