If you consider taking up a business loan to run it smoothly and prevent any hiccups due to a shortage of funds, you can avail one of this wide variety of loan types:
- A small business loan
- Business funding
- A business loan for a new business
- Business loans for startups
- A bank is far more approachable than any venture capitalist
- Banks will not need equity dilution to offer a loan
- Banks will have a more structured framework for funding your requests and most importantly
- Banks will not ask for a share of your business profits or losses.
Things to consider
- Business clarity and a proper plan: Whether you are about to start or have newly started a business, you must have a strategic business plan formulated. This will not only help you to get your loan fast and as desired but will also help you to know your business goals and have a clear idea about the business turnover, your approach, the amount required to invest, who are your clients and how many loans you need to take. You will be more confident before the lender if you have a proper business plan in your hand.
- Expectations of the bank: You will find a lot of banks in your area that will be eager to fund your business, but they will not do so without assessing the risks involved in it and the prospects of your business. This is important for all banks to know whether or not you will default in making the payment at any point in time and if so how to recover the amount of money outstanding. It is, for this reason, banks will often ask for a security or collateral to secure the loan given to you.
- Consult an accountant: The most important thing that the banks will check is your capacity to repay. This they will do by reviewing your financial statement. Therefore, you will need to prepare your accounts properly and make it foolproof and transparent. For this purpose, you will need to consult an accountant not only for proper preparation of accounts but also for auditing it and know how many loans you can take for your business. The accountant will help you to stay within your borrowing limits and also help you in planning everything just as your business requires.
- Your credit score: This is the most significant and primary thing a lender will check out. If you have a poor credit, the banks will summarily reject your loan application. The banks usually have a very high credit score cut off point which may be as high as 700 or even more. However, if you check out alternative sources like libertylending or others, you may get a loan at a lower credit score, but then the rate of interest will be much higher than that charged by the traditional banks.
- Good relationship: Often if you maintain a good relationship with your lender you will have an added edge in getting your loan. The credit history must not show any defaults or debt settlement information in the past. It is for this reasons experts say that getting a loan from a lender successful does not end the process. In fact, it is just the beginning of the relationship between you and your lender which you have to maintain at your own responsibility. A good relationship will also help you to get the required information, instruction and even support from your previous lender in the future.
- Bank statement: The banks will have a look at your bank statement not only to assess your financial capability but also to see that you are eligible for the business profits and that the profit is credited to your account on a regular and timely basis. Therefore, the bank statement is one of the most significant tools that will help the lender to determine easily how much amount you can really take as a loan and repay it as well within the predetermined time limit. It will also help the bank to determine the time limit in the first place.
- Need for a loan: This ideally should be the first point of consideration to take out a loan. If you cannot provide a valid reason to the banks to take on a loan, your application will never be approved. The need must be realistic enough and in accordance with your business plan.
You will also need to keep a close watch on the financial health of your business and review it at regular intervals to make necessary amendments to retain good health. Most importantly, you must be well organized and manage your loan properly right from its use to its repayment following your long term and short term goals.