We all have plans regarding our businesses. Sometimes we need money to keep our business afloat or sometimes we need capital to help grow it even bigger. But what happens when we do not have extra cash lying around to invest in our businesses? We look for help via business loans. Getting a business loan can be tricky if you do not know the right steps. Here’s us telling you how to get a business loan.
You might also want to check this: How To Start A Business Without Money?
How To Get A Business Loan
Have a Business Plan
The key part of having a successful business is having a good business plan. If you do not have a good business plan then chances are you will probably fail. Good businesses prioritize having thorough business plans. A business plan will include an operation plan section and a financial plan section. It will ask questions that are important in making your business successful.
One of the first things that a lender will ask you when they are screening for your business loan is about your business plan. They will want to see whether your business plan is cut out to be successful and will it be a good investment for them or not. To increase your chances of getting a loan make sure your business plan exhibits you can repay the loan.
Why Do You Need This Loan?
You must question yourself why you need this loan. Is it because you want to start a business? Or will this loan be your working capital? Will you use this loan to grow your business? Or you want this loan to be a safety net which you can fall back on? Asking the right questions will make sure that you know your motive for wanting a loan. Lenders will ask you why you need this loan and you need to know the answer. Knowing the motive for your answer will help you answer these questions easily.
The more difficult questions you ask yourself the more confident you will get in answering those questions. You can be sure that lenders will ask you some difficult questions to know if you are the right person for the loan or not.
What Type of Loan Do You Want?
It is important to decide the type of loan you want. There are different types of loans available. Depending on the loan type the interest rate will also vary. Also, there are some types of loans you will not be eligible for. Mainly, the type of loan you should apply for will depend on the reason you want the loan. For example, You just started your business, there are very few loans that you can get in the first year of business. Those loans are highly competitive. So, you will need to depend on credit cards, investing your funds, or borrowing from someone. If you are in business for more than a year, then you will be eligible for different types of loans. You can apply for term loans; get lines of credit, SBA loans, etc.
Different places offer business loans with different options. If you are eligible for business loans than you will have a lot of options on your hand. The best approach for choosing a business loan is to treat it as buying a shirt. You go to different stores. Check out their sizes. See which one fits you and which one does not. Once you find a shirt that fits and looks good on you. Trial two or three more and see which one is the best for you. You see what their term lengths will be, their interests, etc. Once you like a specific loan then you will compare them with some other options. See how it racks up. Then choose the best option from there.
When You Should Use a Bank?
Banks offer varieties of loans. Starting from term loans to a mortgage loan for a commercial space. You should think about using a bank when you do have collateral. Most banks when giving you a loan will want to see collateral. Collateral can be your home or personal asset which you can use to pay back the loan. Banks offer loans to businesses that have good credits. It is not very wise for you to apply for a bank loan when you do not have a good credit score.
The application process for a bank loan is very time-consuming. For a typical bank loan to be approved, it takes a minimum of 6 months. Apply for the bank loan when you can wait for the approval process. It will not be wise to apply for a bank loan when you need quick capital.
When Should You Use a Microlender or an Online Lender?
A microlender is a great option for companies who are not eligible for a bank loan. There are small businesses that are too small to be eligible for a bank loan but can get a loan from microlenders. Microlenders are non-profit organizations that are in place to help small businesses. Online lenders are a great option too when you do not have collateral or you are not eligible for a business loan from a bank because you do not meet the required time limit. Online lenders are a good option when you do not need a huge amount of loan. They can provide small loans to businesses within a short period. The requirements for a loan from an online lender are much less than a bank.
It is important to know your credit score and have important documents ready when applying for a business loan. The hardest part of getting a business loan starts after you have gotten one. So, make sure you use the funds from your business loan wisely.