What Loans Do I Need For A New Business?
Getting a business loan may seem like a tedious, daunting process. However, with a little planning, you can find the right loan for your needs. With a few simple tips, you can increase your chances of approval to increase cash flow and help your business grow. Understanding your business’ qualifications and the right loans for your needs is key to ensuring you can get approval from a trusted lender quickly. Here are the steps to find a business loan for your business needs.
Consider Options
Many commercial loan options are available, but finding the right one will depend on your needs.
- Term loans: Term loans are good for businesses that want to make investments in different areas of the business and need capital. However, they’re not ideal for emergencies. With a term loan, you borrow a lump sum upfront and pay it back in monthly installments.
- Business lines of credit: Ideal for businesses that need a cash cushion or have cash flow gaps, business lines of credit allow you to have access to a set amount of money that you can take from at any point throughout the life of the business.
- SBA loans: SBA loans are ideal for businesses with good credit that need long-term funds. SBA loans are best for small businesses and an affordable solution.
- Equipment financing: Every company needs business equipment. Unfortunately, renting and buying equipment is expensive. Equipment loans allow you to purchase or rent business equipment, including machinery and vehicles.
- Invoice financing: Invoice financing allows you to use outstanding invoices as collateral. With this loan, the lender gives you a percentage of your invoice amount and holds onto the rest. You can use these loans to cover any business expenses while waiting for current customers to pay, and lenders will charge a weekly fee.
- Commercial real estate loans: Commercial real estate loans help you finance the purchase of the property. The property itself will act as collateral for this type of loan, and these loans have multiple structures depending on the lending and loan amount your business requires.
- Microloans: Microloans are ideal for businesses that need less than $50,000 to help them reach their goals. They can be used for working capital, startup costs, and other expenses. Microloans don’t have strict qualifications, so most businesses can apply.
Determine If You Qualify
After assessing your business needs and researching your loan options, you must determine whether you qualify for a loan. You can get a loan from several lenders, including banks, online lenders, microlenders, and more. You’ll need a good credit score to qualify for a loan. If you have a low credit score, you may need to consider other options until your score increases. However, many online business lenders allow you to get a loan with a low credit score, which is why it’s so important to research your options.
Additionally, the amount of time you’ve been in business is important to lenders because you need at least two years to qualify for most bank loans. Some lenders may be willing to lend you money if you’ve been in business less than two years, but those loans may come with higher interest rates.
And finally, you need to make enough money to qualify for a loan. Most lenders require a minimum annual revenue that ranges. Therefore, you must research different lenders and loan options if you need capital for your business. One lender might offer better loans that are easier to qualify for than another.
Determine Your Payments
When getting a loan, you must be sure you can pay back the loan. Assess your business finances and cash flow to evaluate how much you can afford to pay towards the loan every month. Your total income must be more than your total expenses. Some lenders may require daily or weekly repayments, so factor those expenses into your business’ total expenses to understand how much you can afford to pay.
Consider Collateralization
Business loans are either secured or unsecured. A secured loan requires you to put down collateral. For example, if you get an equipment loan, that equipment will be your collateral, which can be seized if you fail to repay the loan. Putting down collateral may increase the amount a lender is willing to give you, but it can be risky for some businesses.
Compare Lenders
Loans differ from lender to lender, so you’ll need to compare your options before choosing a loan. For example, online lenders may not require collateral and offer funding quickly. Meanwhile, business loans from banks require you to be in business for at least two years and have good credit. The type of lender you choose to get a loan from will affect the terms you’ll receive, so always do your research before choosing a loan from a specific lender
Talk to a Financial Advisor
Talking to a financial advisor before you choose a loan can give you insight into the different lenders and their loan options. Advisors can provide you with advice on which options are best for your business depending on its needs and current expenses. They can also help you create a repayment plan to help your business improve cash flow while paying off the loan.
Apply for a Loan
Once you’ve narrowed down your options, you can start to compare lenders and their options. Always check the loan terms and annual percentage rate (APR) to ensure you’re getting the best loan for your business. APR includes all fees and interest rates, making it a simple number to help you determine the total cost of the loan.
You may not qualify for every loan, but you should choose the one with the lowest APR and best terms as long as you’re able to repay the loan.
Final Thoughts
Finding the right loan for your business needs can seem tricky. However, with a bit of research and planning, you can ensure you get the best loan to improve your bottom line and ensure the success of your operations.
