Small business loans: Do they have any benefits for your business?
Alternative lenders can be a good solution for business owners who may not be eligible for financing by traditional institutions. These lenders offer different types of small business loans including equipment financing, merchant advances, disaster loans, among others. Before deciding whether a small business loan makes sense to your business, it is first important to know what your current needs are. Some of the most important questions you need to ask before taking out a loan include;
How much do you need?
How long will it take for the debt to be paid back in full?
Why do you need the loan?
How long have you been in business?
What is your credit score?
Do you have collateral?
Do you have any outstanding loans?
Once you have come up with relevant answers to these questions, you can then decide on the best loan option to meet your business needs. There are several direct lenders who offer small business loans and it is best that you only work with the one who has the lowest rates of interest. If you request the loan from alternative lenders, the loan application process will be much easier and straightforward. There are also online business loans available where borrowers can easily apply for the loan from a different location and have the money approved in as soon as 3 business days.
Types of business loans
Before you begin your search for the best business loan lenders, it is important that you first educate yourself on the different types of small business loans available. This will help you understand the different criteria that business lenders look for to have your loan approved as well as the best loan that can help meet your business needs.
Small business line of credit
In business line of credit, you will be able to get access to funds from a lender as and when you require it rather that withdrawing the whole amount at once. The loan can be helpful when you need to have access to consistent cash to cater for unexpected expenses.
Working capital loans
Companies can use a working capital loan to finance their daily operations. These are short-term loans and are not meant for long-term investments or purchasing long-term assets. Lenders offer the loan in various amounts depending on your business needs.
Small business term loans
In term loans, lenders advance a certain amount of money which requires the borrower to pay monthly interests and the principle between 5 months and 3 years. The loans can especially be useful for small businesses that need financing to expand their operations and require large amount of funds at a go.
SBA small business loans
The loans are advanced by both banks and credit unions and attract a low interest rate. Small business loans are guaranteed by the United States Small Business Administration (SBA). SBA loans can be issued depending on the needs of your business and are among the most popular loans to business owners due to their flexible repayment terms. However, there are strict requirements to have the loan approved and it can also take some time for you to access the funds.
Small business credit cards
Businesses can use these credit cards for short-term financing. The interest rate incurred on the debt will generally depend on the type of card you use and the general credit of the holder.
Steps in getting a business loan
Once you have come up with a loan that is ideal for your business needs, you can prepare yourself for the application process by going through the following stages;
There are many lenders both online and in-store who are willing to offer loans to small businesses. With direct online lenders, the application process is quite simple, but it is important that you only work with a reputable lender. The loan amount varies depending on your business needs and the borrower’s financial history. If you borrow from commercial banks, the application process can be a bit cumbersome with more paperwork involved compared to getting the loan from direct lenders.
Put together your loan ‘resume’
If you apply for a loan in store, you will be required to speak to a representative about your business needs for you to get more information on the best loan options available for your business. This chat with a representative is more or less the same as a job interview. Here, the bank will want to get information about the status of your business, and especially on the financial aspect. Some of the information that you will be required to give include your credit report, business assets, cash flows and if there are any outstanding loans.
Gather a detailed information concerning your business
During the loan application process, you will be required to provide your tax returns, federal tax ID, a list of business executives bank statements, business credit report, liability policies, state filing for your company, and statements of income and losses.
Know what you want to do with the loan
Most lenders will also want to know how much you need to borrow and what you want to do with the money. You therefore need to find out the overall costs of what you need the money to be used for, including any unexpected expenses that may arise. You also need to consider the different loan options available, their interest rates and payment term.
When it comes to small business loans, there are so many options to choose from, so small business owners should carefully prepare before beginning their search process. By taking into consideration your business needs, information required by the lender and the documents required to have the loan approved, you will increase your chances of accessing the loan.
Requesting for a business loan is the best way for a business to expand its operations. With plenty of options to choose from, you can easily get a lender with the affordable rates. Most lenders will offer the loan with lower rates and flexible repayment terms. The application process is also less demanding compared to conventional loans. If you meet all the requirements, you can have the money approved in as soon as 3 business days depending on your lender. This makes it the best loan option if you need urgent funds for business financing. With all the benefits that come with requesting for a business loan, you can start filling out a loan application form and witness your business grow within the shortest time possible.