“What If Your Business Struggles In Financial Debt Or Is Rapidly Growing In a Time Of Debt?”
Not to be confusing, decide if you want to stay stuck in debt or slow-lane by painful trial and error…
Sure some economists say growth in a time of debt is entirely different from growth related debt.
This is because it’s not unusual to want a business loan to cover unexpected expenses.
Sometimes it is tough to handle growth spikes with your current cash flow right?
Seasons, markets and circumstances change…
It all has some impact on daily cash flow and your ability to support your business’s growth.
Here is some basic information on the types of loans available…
What are the terms you can expect and what documentation is required to determine eligibility?
Applying for a Small Business Loan!
Whether you’re just starting out.
You have an established small business with a strong history…
There are many reasons why you may want to apply for a business loan.
Small business loans provide money for:
- Funding startup costs
- Paying off bills from a recent launch
- Paying employees during slow seasons
- Covering accounts payable when cash flow is slow
- Stocking up on inventory in anticipation of a holiday rush
- Developing and launching new products
- Running seasonal marketing campaigns
- Purchasing new equipment to improve business performance
- Covering unexpected or emergency expenses
- Planning for future improvements or expansions
It’s important to have a clear understanding of how you’re going to use the money you obtain from a business loan.
Banks aren’t interested in lending with only vague notions of how funding is going to be paid back.
They want to ensure their investment creates growth within a company.
Big or small so they can be assured of low risk repayments.
How Do Business Loans Work?
To get a business loan for a small business can be more difficult than funding for other purposes.
Business loans represent a big risk to lenders because of volatility and the consumer market.
There are many unknown variables which still affect small business cash flow and profits…
Another reason banks want to know exactly what you plan to do with loan should your application be approved.
Applying for a loan, you’ll discuss terms, interest rates and other details with lender.
It can be a long process requiring a lot of detailed financial information.
This can from both personal and company accounts…
And you’ll likely need to speak with more than one lender to find the right fit for your small business.
Remember a loan is a binding agreement for a given period of time.
Once you sign the documentation you’re committed to paying the money back according to agreed-upon terms.
Make sure you know exactly what you’re getting into before the loan is finalized.
Questions to Ask About Small Business Loans and Small Business Grants.
Because there is time and expense involved…
Consider whether you actually need a business loan and if it is of benefit your small company before applying.
If you determine a loan may not be right for you, you may want to consider a small business grant.
Grants for small businesses have a more difficult application process…
And businesses need to meet certain requirements in order to qualify.
If you determine a loan is necessary, prepare a list of questions to compare loans from different lenders.
Your list helps you narrow down your choices offering options closely aligned with your growing business needs.
You may want to ask:
- If the lender has experience lending to your type of business
- How much the lender typically loans to businesses of similar size
- Who is in charge of application review and approval
- What documentation is required to apply for a loan
- How long a typical application-and-approval process lasts
- Whether interest rates are fixed or variable
- If there’s a penalty for paying the balance off early
If you determine a small business grant is the right track for you…
It’s important to research requirements and see if you fit the lender’s requirements.
Grants for small businesses are awarded without interest rates or repayment expectations.
You can apply for small business grants from government entities or private organizations.
It’s important to keep in mind when doing due diligence…
All small business grant providers have different requirements.
What Are the Types of Business Loans?
Lenders offer a variety of loans for businesses depending on what the money is going to be used for…
And how companies are able to guarantee payment.
Secured loans require collateral to back up amount of loan.
This means you could lose what you put up if you fail to pay in full.
Unsecured loans are granted to companies with solid credit ratings.
And may offer lower interest rates than secured loans.
Lines of credit work like a credit card.
It allows you to borrow against a set amount as needed and only requiring interest payments on money you use.
Merchant cash advances are based on your volume of monthly credit card sales…
And are paid back using a percentage of each future sale.
Accounts receivable loans use outstanding invoices as collateral to help pay off short-term debts.
Equipment loans are granted specifically for purchase of new equipment using what you purchase as collateral.
Construction loans provide funding to expand your existing location or build a new facility.
And the building is considered collateral.
Each loan type has a specific payment structure, term length, and interest rate.
Some are more difficult to qualify for than others.
And most require you to share details with associated paperwork when applying.
Small business owners may apply for a government loan from Small Business Administration (sba).
An SBA loan includes microloans, real estate loans, disaster loans, loans to purchase equipment and more.
There are 2 types of SBA loans:
(a) loans and SBA 504 loans.
Both types of loans have different SBA requirements and SBA interest rates.
It’s important to keep in mind loan rates vary depending on loan structure, size and type.
Current SBA loan rates ranges from 6%-8%.
How to Apply for a Business Loan for Your Small Business
Once you decide what type of loan you need…
Your lender requests certain documents with financial records to determine if your small business qualifies.
These documents may include:
- A business plan showing your intentions for the loan
- Tax returns for your business
- Three to five years of company revenue figures
- Personal and business credit information
- Personal and business bank statements
- Cash flow history and future projections
- Business licenses and certificates
- Current profit and loss statements
- Detailed resumes of key executive staff members
- Franchise, partnership, and other legal agreements
The lender reviews this information along with your application.
Before taking time to gather paperwork, review the specifics of loan one more time.
Ask questions about anything you still don’t understand.
And be ready to move on to another lender if something doesn’t sound right.
If the cost of the loan is more than the benefit you’ll get from it, you’re better off seeking alternative options.
A business loan can give your company the boost it needs to make it through a difficult time.
And this can include funding new growth to catapult you to future success.
Talk to a variety of lenders before making your final decision.
Settle on terms and conditions compatible with your financial situation.
Structure your budget so you stay on top of loan payments to ensure your business is stronger.
You want to be more profitable once the balance is paid off…