5 Things You Need Before Applying for a Business Loan
Businesses require adequate funds to expand, market their business and purchase more inventories. However, most entrepreneurs, more so those who run small or medium enterprises find it hard to raise adequate funds to support crucial business processes. If you are one of these unfortunate entrepreneurs, then you should consider taking a business loan to get your business off the ground.
What is a business loan?
A business loan is a form of credit offered by banks, top merchant cash advance companies, and commercial or private lenders to businesses that are unable to fund some of their business expenses.
What you need to know about business financing
1. There are many types of business credits
Ideally, there are several types of business financing that differ depending on the loan term, interest rate, and many more factors. The common types of business credit offered out there include:
- Bank loans
Bank loans are the most common types of secured loans for businesses. Usually, bank loans are either medium or long-term. However, an entrepreneur may qualify for an unsecured loan in case he or she has excellent credit.
Despite the fact that a bank loan is the most popular type of credit for businesses, most banks have tight policies that lockout
entrepreneurs from receiving a loan to finance their business.
Unfortunate entrepreneurs who face this problem ought to consider a merchant cash advance. Unlike the bank loan that requires collateral and an excellent credit score, best merchant cash advance lenders give you credit in exchange for a certain percentage of your future credit card sales. As such, the lenders will not concern themselves with your credit history as long as your venture’s future is assured.
This type of business financing does not require security, it is easy to apply, and the approval of your application is quicker as compared to a bank loan.
2. Time in business matters
The time your business has been operating matters a lot when looking for a loan. Companies that have been in the industry for an extended period are likely to qualify for a higher loan limit since they have demonstrated that they can survive the fierce competition in the business industry.
3. Some lenders may limit the use of a loan for particular purposes
Most lenders will limit the use of your credit to specific business purposes like expanding your business, purchasing new equipment, starting a construction, and many other business tasks. Therefore, you would want to look around for a loan that is intended for your particular business needs. The lenders limit your use of their funds to business operations with the intention of empowering your business.
4. A business plan may be crucial for startups
If yours is a startup, you should prepare a professional business plan when hunting for a business loan. The lender will use your business plan to evaluate your future profits, cash flows, and sales. For this reason, a good business plan will help you secure adequate funds for your startup while a poorly formulated business plan will deny you the chance to get a loan. A business plan, however, may not be a requirement for established businesses
5. FICO score
Sometimes, lenders use your FICO score to approve or deny your credit. For this reason, an excellent credit will help you secure a higher loan limit while a weak one might deny you the opportunity to acquire a loan for your business.
If you want a reasonable deal, it would be a wise idea to compare the business loan interest rates of different providers and consider applying for the one with the most reasonable rates. You can use an online business loan calculator to find out what your loan and interest repayments will be.
Before signing any loan contract, it is imperative that you read your business loan agreement to ascertain that it is free of hidden costs that might impose on you an unnecessary financial burden.
How to get a business loan
Getting a business credit is not a difficult task once you have spotted the right service provider and you know what you are looking for. Most providers have a straightforward application process that entails:
- Filling and submitting an online application from the website of your lender.
- Your service provider will evaluate your application and get back to you.
- Select a loan program that favors you.
- Provide your service provider with the necessary documentation.
- Sign the agreement and receive the loan.
GoKapital helps entrepreneurs obtain business loans nationwide. With GoKapital, you can apply for a number of business lending options, including SBA loans, short-term loans, lines of credit, merchant cash advances, equipment financing, franchise loans, business acquisitions loans, and loans for minorities and women. Businesses can instantly prequalify for a loan by filling out an online application. Visit: www.gokapital.com