As an entrepreneur, you are probably looking at this screen and I know you have a killer idea. Well, the first word I have to say to you is congratulations, but the next thing you need to think about would be something where the rubber meets the road: business loans. How do you make your dream a reality? With some type of finance options you have, of course. Here’s some of the information you need to know about the bread and butter of your business operation:
There are many different types of business finance options you have.
According to Lantern Credit, there are small business long term loans and small business short term loans. “Small business long term loans are good for business owners that want manageable payments or favorable interest rates because these payments are stretched out over a longer payment period,” a Lantern Credit spokesman wrote. On the other hand, a small business short term loan is good for business owners who need assistance with daily expenses, cash flow, and other day-to-day needs.
Although these are the two main types of finance options you have, there are plenty of other types of financing to consider. For example, there are term loans, SBA loans, lines of credit, equipment loans, invoice factoring, invoice factoring, merchant cash advances, personal loans, and even business credit cards and microloans.
There are certain requirements needed for a business loan.
When applying for a small business loan, your lender will evaluate you based on certain criteria. First of all, they will be looking at your personal credit history. Of course, if your personal credit rating isn’t quite as high as you would like, don’t fret; as long as you have built some business credit you might still qualify. Next, they will evaluate the cash flow and income of your business, looking at such things as your debt-to-income ratio. The age of the business and the current amount of debt that the business has will also be evaluated, as well as an analysis of the current assets of the business. Normally, lenders will want to look at this to see what can be used as collateral. Finally, the type of business and the industry they are in will be evaluated as well. If you don’t qualify for a small business loan, there is no need to panic. In many cases you will be able to qualify for a personal loan in order to fund your business operations if there is no other route to go.
Know how to obtain a small business loan.
There are several steps to follow for obtaining a small business loan. First of all, you should fully determine what type of loan that you need. What is the purpose of the loan? Is it for starting your business or managing day-to-day expenses? Is it to help your business grow or to provide a safety net? Establishing a purpose is an important first step.
Your next step would be to shop around. Taking a look at such things as online lenders is appropriate if you lack collateral, need funding as quickly as possible, or haven’t been very established yet. Of course, the interest with an online lender might be higher, but you are more likely to be approved as well. On the other hand, you should use brick-and-mortar businesses when you have a ready supply of collateral, you have good credit, or you aren’t in a hurry to get the cash. Additionally, if you have a really small business, you might want to consider using a microlender.
The final step before formally making the application would be to determine if you can qualify for the loan in the first place. Such things as determining your credit score, knowing whether you can afford the payments, knowing how long you have been in business or determining how much cash flow you already have are all ways to determine if you are likely to qualify for a small business loan. After that, the final step is to simply gather your documents and formally apply for the loan.
