Do you have an amazing idea for a business? Read this article to find out how to get a business loan to make your dreams come true.
Did you know that about 50% of small businesses fail after five years?
It's no wonder that getting a business loan might be tricky.
Do you have an amazing idea for a business?
Read this article to find out how to get a business loan to make your dreams come true.
Brilliant Business Basics: How to Get a Business Loan
Finding a small business loan can be challenging because it's a bigger risk for a lender than a larger more established business. Obtaining outside financing is usually necessary to start or grow a business or to help cover day-to-day expenses.
The more prepared you are when applying and getting approved for a business loan the better.
Build Your Credit Score
A lender uses your score to know if you are money lending worthy. A lender doesn't want you to borrow the money and default on the loan which is why they take a serious look at your credit history. Your personal credit score shows them how reliable you are as an owner.
How Much Money Do You Need?
When asking for a loan it's important to know how much money you need and exactly why you need it. Lenders won't approve a loan if you don't specify why you need it and if you can afford to pay it back.
There are many reasons for why you might need to take out a business loan including but not limited to:
New Business expenses
Cover your rent payments while starting
What Loan Type Is Right for You?
The reasons for needing the loan will help you figure out which type of business loan you get. If it's a new business most lenders require cash flow to support repayment of the loan, in this case, you'll have to rely on getting a loan from friends and family, crowdfunding, personal loans or a microloan from a nonprofit lender.
A business that has a year or more of history and revenue you will have more finance options including SBA loans, term loans, and business lines of credit. If you qualify for more than one loan choose the one that has the lowest APR.
If you want a business loan, you'll need a lender. Here are some of your options.
These are great to use when:
You can provide collateral
You have good credit
You don't need cash fast
Traditional bank options include term loans and lines of credit. The U.S. Small Business Administration provides general small-business loans with its 7(a) loan program.
These are good to use when your company is too small to apply for a traditional loan. These are nonprofits that lend short-term loans less than $35,000. The APR on these loans is usually higher than bank loans.
These are great to use when:
You lack collateral
You lack time in business
You need funding quickly
Online lenders provide lines of credit between $500-$500,000. You can check out the difference between kabbage vs fundera when looking at online lenders.
Ready to Apply for a Business Loan?
There are many options for business loans and different lenders available. Doing your research on what these lenders will require when you apply will increase your chances of getting approved for your loan.
Ready to apply for your loan today? Contact us to find the right loan for you.