Whether you’ve been running your business for years or are just starting, more likely than not you’ll have to take out a business loan. The only difference between a business loan and a general loan is they must be for business related purposes, they still require a good standing with the bank or lender and have interest rates. Though there are many options there are a few factors you should consider to ensure you are fully prepared before you begin the application process.
Know all the options
Banks and credit unions are not the only places that give out business loans, a lot of times the process is much quicker but the interest rate will be higher. Certified business loans is a financial platform that offers small business loans and unlike larger lenders or banks you’ll be able to start paying back small amounts quicker instead of having to shell out a large amount each month. If you’re in desperate need of a loan and don’t have the greatest credit score merchant cash advance might be the best option. It’s way easier to get approved for since its based off future credit card sales. If you’re business is doing pretty well but you’ve hit a snag or need a little help this option might be your best bet, but be warned the interest rates and fees are much higher than going through a bank or lender.
Even if you’ve never taken out a loan before, chances are you’re aware of what is considered a good credit score. If you’re looking to take out your first loan, have no credit cards or any payments towards something financed like a car, you might not get approved solely because you don’t have a line of credit established. Banks and lenders want to see that you make payments on time and consistently, even small payments count towards your credit. If you’ve have credit cards or financed payments before it would be wise for you to obtain a personal credit report to see where you stand and if you meet loan standards. You can also check for errors and make sure all your payments show up where they should.
A credit score of 700 or more is considered high but you don’t necessarily have to be at or above that number. Having a good credit score within the range of 650 or higher can get you a good loan though it won’t be as much as it would be if your score where higher. If your credit score is on the lower end, it might be wise to wait a bit until so that a negative inquiry doesn’t end up on your credit report if you get denied.
Have a number in mind
Knowing the exact amount you need when going for a business loan because most banks and lenders will want a definitive plan of how and where the money is going. You should also bring proof that you need the amount of you have asked for and be prepared to answer all finance questions your lender will be asking. For example, if you’re planning to expand your store with the money then bring in the blue prints with the materials and their cost. They might ask you about your business plan and future plans as well. If you’re not sure how much money you actually need you should meet with a financial adviser and map out all the things you need.
Getting approved for a high loan means you need to have the money to make the payments back to the bank and they will definitely be looking into your past personal and business taxes. Make sure what you’re asking for is realistically in your budget.
Nobody can predict the future, so some banks and lenders will want to see if you have assets to cover the loan in case your income or business tanks. Be sure you’re willing to pledge things such as your real estate, inventory and equipment to pay back the loan.
All things considered, the only person who can decide whether you’re ready or not, is you.