Last Updated on August 8, 2024 by Nasir Hanif
Getting ahead in business and growing can require extra funding. While you may already be operating a successful business, a cash boost can be the answer to earning more money in the future. However, it may not be as straightforward as you first thought to secure that necessary business loan. Before you start looking at your options, consider the following information.
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Seek Expert Help
As much as you probably want to handle your business finances on your own, there is merit in seeking help from experts. For example, a small business finance broker can access the most competitive and relevant business loan options to suit your needs. The same expert can also help ensure the loan amount comes with affordable repayments and manageable interest rates.
Know The Loan Type
There is more than one type of business loan, so it’s a good idea to work out what your intentions are for the money so you can decide on the right one for you. To get a business line of credit, accounts receivable financing, working capital loans, small business loans, and equipment finance are some of the most popular options.
Understand Your Credit Score
It’s hard to believe that a simple series of numbers against your name can be a deal maker or breaker. However, it’s true – your business credit score can play a part in whether you will gain approval for a loan.
A business credit score differs from an individual’s credit score. Rather than following the scoring range of 300 to 850, a business score is 0 to 100. You can maintain a healthy credit score by paying bills on time, avoiding legal trouble, and not taking on too much debt.
Be Prepared
Whether you’re trying to secure a loan through a financial broker or your bank, be prepared. Make sure all your paperwork is up to date and that you have tax records available.
You may also like to write a detailed description of your plan for the funds, the value of your assets and liabilities, and your total worth. This information can be relevant when lenders are deciding whether you’re a suitable candidate.
Find the Right Lender
Every business is unique, which means lending options are too. While you can talk to a financial adviser or broker about various lending options, there are three leading players to consider.
A national financial institution, such as your bank, is often many business owners’ first port of call. You may already have a relationship with them, and their lending rates may be desirable for your situation.
You may also like to consider an alternative lender, which bridges the gap between community lenders and banks. These lenders tend to focus more on growth potential than credit score.
Finally, you may want to explore your options around credit unions and community lenders. Their focus on economic growth may work in your favor.
Understand How You’ll Pay It Back
Depending on what you’re borrowing the money for, it’s crucial to plan how you will pay it back. A loan can solve a short-term cash flow problem, but it needs to be paid off eventually.
Have this information ready for your chosen lender to view. If they see you have a sound repayment plan and budget in place, they may view you in a more positive light.
Given the complexities surrounding business finance, it’s always a good idea to do your homework. Get your ducks in a row with your financial information, think about the type of loan you need, and consult an expert in the field to guide you every step of the way.
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