Finance

December 21, 2018 at 5:11 am

How to Get a Small Business Loan in 4 Steps

They say money makes the world go ’round. Well, it’s definitely true in the business industry. Business owners know that money plays a huge role in the growth of their business, and sometimes, it takes more than what you expect to get things going. Small business loans are a greatway to help owners looking to finance their businesses. However, it can be difficult to qualify for a loan if you aren’t fully prepared and if you don’t know what to do.

With that said, here are four steps to help you get a small business loan:

1.    Know Your Loan Options

There are different types of loans available for small businesses, so make sure to choose the right one for you. Keep in mind that the purpose of the funds usually designates the type of loan you need and the financing options available.

There are three main types of loans:

  • Asset-Based Loans – your current assets, or assets you are in the process of acquiring are used as collateral (i.e. Equipment Loans and Invoice Financing).
  • Short-Term Loans – for short-term financing needs; easier to qualify for; faster funding times.
  • Long-Term Loans – usually offered by traditional banks (i.e. SBA Loans).

There are different qualifications for each type of loan, and itdepends on what your business needs. So, make sure to evaluate your options thoroughly before you apply for a business loan. Nobody wants to waste precious time and money on loans that the borrower can’t qualify for.

2.    Find Out Your Eligibility

Lenders have a set of factors to determine if you are eligible for a loan. Knowing these factors will help you pinpoint the type of loan for your current situation. Most lenders evaluate their clients using the following eight factors:

  • Years in Business
  • Credit Score
  • Repayment Ability
  • Collateral Offered
  • Personal Guarantee
  • How Quickly You Need Financing
  • Customer Payment Processes
  • Loan Qualifications by Loan Type

3.    Find a Lender Experienced in Your Industry

When scouting for a lender, it’s definitely a benefit to go for someone who has experience in your field. These lenders understand the needs of your business better than other potential lenders.

Make sure to ask questions before you apply for a loan, such as:

  • The documentation you need to provide;
  • The number of loans they have funded in your industry;
  • Their required repayment schedule;
  • The application process and how long it usually takes;
  • And any other questions you may have that are specific to your business or your type of loan.

4.    Submit Your Loan Application

If you’re looking to apply for a loan, you probably already have an amount in mind to fund your business. This amount will be the basis of your loan application and the type of documents that will berequired. Compared to long-term small business loans, the application process of short-term loans is simpler. Generally, online lenders will only ask you to provide basic personal and business information. Long-term loans,on the other hand, have a lengthy application process and you’d have to submit substantial documentation.

When applying for loans, you have to make informed decisions. SMB Compass helps small business like yours to get the funding you rightly deserve. Don’t hesitate to give them a call at (646) 569-9496 or email them at info@smbcompass.com.

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