According to websitebuilder.org, there are 30.2 billion small businesses in America. Interestingly, there are 3.7 million micro-businesses in America that have less than 10 employees.
Small business in America provides employment for over 55% of the workforce, and if you are a small business, you would need some form of working capital to function, scale or even get through business challenges.
In this article, we are going to look at 6 easy steps with which you can get a small business loan for your business.
Evaluate Why You Need the Loan
The first question you should be asking yourself is why you need the loan in the first place.
Identify where you will be spending the funds once your loan is approved.
Whether this spending would actually give you any returns in the near or foreseeable future.
Usually, small businesses take loans for starting up, working capital, growing the business, and have a runway in case of certain events that threaten the existence of the company.
Once you evaluate the actual reason why you need the loan, you will be closer to identifying whether you need the loan or secure the loan.
Explore Different Types of Loans That Are Available
As you might know, there are different types of loans available for different businesses. Some of them have flexible plans, and some are very rigid in terms of repayment.
There are 12 common types of small business loans. You can consider the type of loan for your small business from this.
- Installment Loans
- SBA Loan
- Business Lines of Credit
- Equipment Loans
- Short Term Loans
- Merchant Cash Advances
- Personal Loans for Business
- Invoice Financing
- Crowdfunding or P2P Loans
- Micro Loans
- Commercial Real Estate Loans
- Business Credit Card
Identify the Right Lender for Your Small Business
After you have evaluated why you need the loan and different types of loans that are available, you should identify the right lender for your small business.
Some lenders have better payment terms for transactions, and you should always prefer a lender than gives you maximum leeway in terms of repayment. Many lenders might be ready to offer loans but check their terms and conditions carefully before choosing the credit for your small business.
If possible, try to find the best current account for your business and then shift the company to that bank.
A current account from banks provides loans to companies who have been transacting with the same bank. That increases the chances of your loan getting approved.
Check If You Qualify
Credit Score determines how qualified you are to secure a loan. If you have a bad credit score, you should first work on improving this score and then start applying for loans. It is always best to have multiple options when seeking a loan and is qualified to ensure that you can pick the best loans that serve your business needs.
Some banks have different criteria for military personnel, if you are one of them. Please check with your bank with necessary proofs to know about it.
Your loan qualification will majorly depend on these factors:
- Credit Score
- How Long You Have Been in Business
- What is your revenue
- Can you afford the repayment
Ensure You Have All The Documents
Different kinds of loans require different paperwork, and some of these will require paperwork related to the collateral which you are submitting to the lender. Many times we have seen that small business owners under the assumption of some paperwork apply for the loan and only when the loan is about to be approved, they find they do not have the necessary paperwork. Avoid this situation and have all your paperwork readily available.
Have a repayment plan
Having a reasonable repayment plan in mind before securing the loan will ensure your funds are not utilized in a counter productive manner. A repayment plan will also help convince your lender that you are not a flight risk after securing the loan.
So there you have it, 6 steps to secure a loan for your small business.
Good luck with your venture!