Every business at one point will need extra cash flow. This money helps to hire staff, build new offices, or buy more resources. Your business might be stable when you start; however, things can change. Your company may have a firm financial grip in the beginning, but excessive sales can bring a need for more help. Before heading out to the bank, consider these five things to know before getting a small business loan and smart ways to pay it back.
1. Credit
Instead of asking for more money for your business, make sure your credit is good. Understand that there is a big difference between business and personal credit. Clean up all debts in your personal life. Lenders will often check your personal debt to income when applying. Find your business credit at Dun and Bradstreet.
2. Documents
The key documents lenders look for include business plan, leases on buildings, credit reports, and two years of business and personal tax returns. SBA emergency assistance in Colorado Springs offers resources you can use when looking for loans or lenders.
3. Lenders
Find out what lenders are appropriate for your industry. Use the internet to your advantage to see which lenders are giving out the most loans. With new technology emerging daily, banks are more eager to lend to growing companies.
4. Usage
How will you use the money when you get the loan? Make a checklist so you have a better idea of where to put the funds. Lenders will often ask you about the spending plan. Make sure it’s used for business. Avoid mingling any personal finances with your loan.
Have a plan on how you’ll pay the loan back. Will extra staff bring in money to clear the loan when it’s due? Never borrow or ask for money when you don’t have a backup plan for repayment. This only makes things hard and creates unnecessary stress. Show the lender the steps you’ll stake to pay it back. Develop an extra account and deposit a certain portion of profits for loan repayment. It’s also smart to have an end date for repayment. Figure out how long it will take to pay the loan in full. Try to be precise in your calculations and share this with the bank.
5. Research
You can never do enough research when considering a small business loan. Use the internet to join groups, forums, or create your own. As a business owner, become hungry for knowledge and what lenders want. Create a long list of lenders specific to your industry. Ask friends or other business owners what they do when needing a loan. Research helps you get prepared for the lending process.
Figure out how much you need. Too many companies ask for too much and soon go under from slow sales. Read trade magazines or consult business groups in your area. Look for loans in your ethnic group culture or military status. There are thousands of grants available for people with disadvantages in particular communities. Spend your time considering other options for loans. New online banks are popping up everywhere offering to help the next startup.
These are five things to know before getting a small business loan. Understand business and personal credit. There are different scores for each. Pay off all debts before submitting a loan application. Gather all of your documents and know which ones are important. Enhance your computer skills because the majority of loan applications are online. Make sure you know which documents your lender needs. Think about how you will use the loan in your business.
Write out a detailed list that shows your responsibility with the lender’s funds. Develop a repayment plan that makes sense. Share this plan with your lender to build their confidence that you know what you’re doing. Set aside money to ensure you pay the loan back. Never co-mingle personal and business funds.
Conduct research online, through forums, or join groups. Research helps you understand what lenders want and where to find the best small business loans. Search loan opportunities by ethnicity, culture, community, income, military, or gender. You’ll discover a ton of loans being offered and fit with your company profile.