Short Term Business Loan To Help Get You There

One of the biggest obstacles to success for many business owners out there is the need for capital. Capital allows business owners to invest in the commercial ventures they envision. Funds are necessary to cover a variety of different expenses. With loan funds, individuals can start and/or grow their businesses. At the same time, those who are just starting out often don’t have these funds available and need to borrow them. That’s why it’s so important for business owners to have access to short term business loans.

Short term business loans make it possible to take advantage of opportunities as they come up for your company. Whether you need to hire labor, purchase equipment, or rent office space or other types of commercial facilities, you can do your research on business loan companies who are able to finance your ventures.

However, you need to fully understand the financial product you’re buying when you take out a business loan. A short term business loan will cost your company money. You’ll have to pay interest on your commercial loan. You need to plan things out carefully. Through careful planning, you can get a good return on investment. You’ll spend money on interest costs for a short term business loan you take out. However, you can get this money back down the road through increased profits.

The following is some important information to be aware. This information is important if you’re taking out a short term business loan to help get you there.

Reasons to Take Out Short Term Business Loans

Whether or not you should take out a short term business loan depends on a variety of factors. These include your company’s budget and the expenses you intend to spend the loan money on. You need to put careful research into deciding whether to borrow and how much to borrow.

There are numerous advantages to short term business loans that you’ll want to consider. The following are five of the biggest advantages to borrowing short term to acquire added capital for your commercial ventures.

1. Start Up Your Business.

Starting a business takes money. Expenses required to start up a business include purchasing equipment, inventory, facilities, and labor. New business owners frequently don’t have the capital needed to pay for these expenses.

For many would-be business owners, borrowing is the only way to establish independence by starting up a new company. It may be almost impossible to raise enough funds through employment to start up a business. You shouldn’t hesitate to borrow if you have a loan available for startup funds and you have no other way to finance your venture.

2. Be Able to Jump on Opportunities That Come Up

One of the most frustrating things for a business owner is not being able to take advantage of opportunities that come up because of a lack of capital. Borrowing is often a great solution in this situation.

Business owners often need to pursue opportunities that come up immediately or they will be lost. Taking out a short term business loan, in this case, could drastically increase a company’s profits. Business owners may find that they’ll earn much more by purchasing additional inventory or hiring on more help to meet a sudden surge in business needs than they spend on interest for any loan they need to make these purchases.

3. Expand Your Company Faster

If you don’t borrow money to make purchases for your company, you’re going to have to wait longer to do things like expand. Slowing down the expansion of your company sets you back. It gives the competition the chance to surpass you and leave you behind.

As a business owner, you should be taking advantage of any opportunities for expansion that come up. While you want to make sure that you can afford to borrow and factor loan payments into your company budget, you shouldn’t let the expense of borrowing scare you away from the proposition.

Five reasons why to take out a short term business loan

4. Taking out a Loan Gives You Peace of Mind

Business owners don’t necessarily have to spend money they borrow right away. This is especially true for business owners who take out a line of credit loan.

Borrowing is a great way to simply put aside some funds that can be used on whatever comes up in the near future. It’s stressful running a business on a tight budget. Having some loan or credit account funds available gives business owner peace of mind. It creates a financial cushion. With a loan, business owners aren’t constantly worried that their cash flow will dry up and they won’t be able to continue operations at their company.

5. Helps Your Company Hang on in Emergency Situations

Another common reason why business owners take out a short term business loan is to get their company through a dry spell. Loan funds can keep a fledgling business venture afloat when profits have been lower than expected due to a poor economy or unexpected damage to inventory, for example.

It’s not safe and secure to run a company without an emergency fund available for when the unexpected comes up. You should keep some loan options available to you so that you know where your company can turn in times of adversity.

How to Take Out a Short Term Business Loan

It’s important to be aware of how the borrowing process works for a short term business loan before business owners start to shop business loans. The process of taking out a short term business loan for your company is much like the process of taking out a personal loan. However, there are a few differences.

The first step in the process is to shop around and figure out what all the various options are. In addition to researching and evaluating the different types of loans available, business owners should also pay attention to their budgets. Business owners need to determine how high a loan payment they can work into the monthly budget at their company. This prevents companies from getting in over their head with debt after they borrow business loans.

Once the right loan product is determined, the next step is to apply. Lenders need a lot of information from business owners looking to borrow for commercial purposes. They’ll ask for information on the company’s history. They’ll want to see financial statements showing how much the company has made in recent years.

Another key document with a business loan application is a business plan. The lender will want to know what the business owner is going to spend the loan funds on. Business owners need to convince lenders regarding the profitability of the proposed project.

Once a company is approved for a commercial loan, the loan funds are dispersed and repayment of the loan begins. Depending on the terms of your loan agreement, you may be able to take advantage of features like deferred repayment that give your company some time before it’s necessary to start repaying the loan.

Different Business Loan Types to Look Into

There are numerous types of business loans that you’ll need to choose from. It’s best to analyze the options and do some research on your finances and situation. This helps you choose the best product for your needs.

Here are some of the most commonly available types of short term business loans you’ll have available as options. When you shop business loans, look out for these. Find which product has loan terms that will be most cost-effective and convenient for you.

Term Loans

A term loan is among the most common and traditional types of loan that is offered for small businesses by various companies. These loans have a lot of advantages. For one thing, there is a great deal of flexibility in the different term loans that are available to business owners. Loans like these can be used at the business owner’s discretion to finance diverse business needs. The funds from a term loan are used to cover expenses that the business owner is unable at the moment to pay in cash.

Term loans are commonly used for big projects like purchasing equipment or building additions onto commercial facilities. A lot of different lenders out there will offer term loans to business owners. Not only do traditional banks offer terms loans, but nontraditional lending institutions offer them as well. If your company is relatively well established and has already built up a good credit history, it should be pretty easy for you to take out a term loan from a traditional lender. However, it’s important to note that newer companies may struggle to gain approval for loans like these.

SBA Loans

Small Business Administration (SBA) loans are loans that are subsidized by the government. Because the government subsidizes these loans, SBA loans are often available on better terms than a short term business loan offered by a private financial institution. SBA loans usually have lower interest rates than regular loans from private lenders.

While SBA loans are often more affordable in terms of lower interest rates, they are also a little bit more complicated to acquire. Small business owners must go through a long process to take out SBA loans. They need to apply by filling out paperwork, and they also need to meet numerous eligibility requirements. As with loans private lenders, credit history checks are generally necessary for approval for SBA loans. In addition, companies will need to demonstrate the profitability of their company. They do this by providing financial statements/documents to be approved for SBA loans.

It’s true that a company’s credit history is important when small business owners apply for SBA loans. However, the Small Business Administration does back the borrower even in the event of a default. This means that SBA loans are sometimes more widely available to business owners without a long, strong credit history than loans from private lenders.

Business owners need to be aware of the fact that there are numerous types of SBA loans available. Three of the most common SBA loans are the SBA 7(a) loan, the SBA 504 loan, and the SBA Express loan. SBA 7(a) loans are designed for larger purchases. SBA 504 are designed for purchasing commercial real estate. And SBA Express loans are generally smaller loans that are easier to take out and pay off relatively quickly.

Equipment Loans

A lot of business owners need to make purchases on expensive pieces of equipment to get their business off the ground in the early days. That’s what equipment loans are for.

It’s often easier for business owners to take out equipment loans than it is for them to take out regular term loans. When business owners take out equipment loans, they’re getting a secured loan. The equipment that they buy serves as collateral to secure the loan. This means that there is less risk for the lender. Because there is less risk, the lender is more willing to offer lower interest rates and financing to business owners who don’t have a long credit history and aren’t yet extremely well established.

If you need equipment for your business venture, you’ll want to make a decision between buying or leasing the equipment you need. Buying offers many advantages. Business owners often prefer to know that they will have the same equipment for years to come so that they don’t have to adjust to different equipment models in the near future. Also, equipment owners can often take advantages of tax incentives due to losses because of depreciation in equipment value.

Those who are unable to secure an equipment loan because of credit history issues might find that it’s easier to acquire the equipment they need through a lease. Equipment dealers are often more flexible about credit and income requirements in their lease terms than lenders are when evaluating applications for financing.

Equipment Financing When You Need to Be Better Equipped

Lines of Credit

Business lines of credit is another option for those who are looking for the right short term business loan. Business lines of credit are a convenient option for business owners who just want to have funds available through a credit account for whenever they decide to make a purchase. A line of credit is great because it keeps funds available to the business owner while also allowing for the possibility that the business owner doesn’t use all of the available funds at once and max out the account.

Business lines of credit are great for helping business owners to budget and manage their finances month to month. Business owners use their line of credit funds however they want. They can reserve money from a line of credit as an emergency fund or keep the money to the side so that they are able to take advantage of opportunities that come up that might require an immediate investment.

Personal Loans

Another option for a small business owner in need of capital funds is taking out a personal loan. A personal loan is a good option for a fledgling business owner with a good credit history. A young company won’t have the credit history that’s necessary to secure a term loan or SBA loan. Personal loans allow business owners to allow on their own personal credit history in order to secure financing for their business ventures.

There are many different types of personal loans that business owners can take out. They can take out either secured or unsecured loans. For secured loans, they can take out payday loans if they work a job in addition to owning a business. They can also use their vehicle or any heavy equipment they own to take out a title loan to get the capital funding they need.

In terms of unsecured loans, business owners with high credit scores and regular income should easily be able to secure personal loans. The amount a business owner can borrow varies depending on his or her credit score and income level.

In Conclusion

A short term business loan may be exactly what you need to move your company forward to where you want to be. You don’t want to let business opportunities pass you by. Don’t waste any time. Find the business loan type that’s right for your company’s situation. These days, there are many business loan products available for you to choose from. Do your research and apply for the perfect loan today.

Construction Business Loans to Help Build Your Company

Many of us envision our business going from our imagination to an actual brick and mortar building. We may be very aware of what we want the finished product to look like. Coming up with the funds to build our dream construction can be daunting, however. We may wonder where we will get the funding to bring the physical manifestation of our business into a reality. This is where construction loans come into play. These loans give us funding to physically realize the construction of our business. So, if you are interested in business finance, read on.

What are Construction Business Loans and Why Do I Need One?

A construction business loan is a loan to fund the construction or renovation of a physical property meant to house your business. You can take out this loan to develop the land as well as other forms of construction on business property. You can compare a business construction loan to a mortgage in some ways. However, it for paying for the construction or renovation of a commercial property instead of a personal or residential property. A residential mortgage is there to pay for a pre-existing home or the construction of a home.

If you’re a business owner who wants to renovate your business space or build a new location for your business from the ground up, you may need a construction business loan. Most business owners can afford to fund the renovation of their business space or the construction of it out of pocket. A business construction loan takes away the need to have money for a renovation or construction upfront. From a practical standpoint, you’ll more than likely seek a business construction loan if you want to build a new space for your business or renovate your existing space.

Requirements For A Construction Loan

Lenders don’t take business construction loans lightly. They understand how risky this type of loan can be. As a result, they require a lot of information upfront. Business owners seeking this type of loan will be required to furnish intricate details regarding your construction plan. These details are called the “blue book”. This includes a timeline for the construction project,  floor plans, materials inventory, and suppliers and contractors. Besides, you’ll also need to supply information about the builder. This information will need to show lenders that you have found a reputable licensed builder.

As proof of a builder’s merit, you will need to supply the past and present projects of your chosen builder. Also, as stated above, you will need to provide a profit and loss report. Some lenders will ask for as much as a twenty-five percent downpayment. This works similar to a good faith payment and acts as insurance that you’ll be able to carry out the cost of construction, worst-case scenario. A property appraisal is also a key factor when it comes to lenders. They will determine the value of the property as a finished project. The property value is both location-based and market-based. Lenders focus on five key areas:

  1. Specific details about the construction
  2. A qualified builder
  3. Twenty to twenty-five percent Down Payment
  4. Your ability to repay a Loan
  5. Property value appraisal

The Mechanics of Construction Business Loans

Construction loans follow a particular format. You can use the first part of the loan to cover the building, renovation, or reconstruction of a property. However, once the construction is complete, you use an end loan or permanent loan to pay off the short term initial loan. These loans are designed to complement the construction process and can run anywhere from six months to a few years. This type of loan is designed to be paid off once the construction has finished or it has been refinanced or sold.

Interest Rates and Fees

As with any kind of credit or loan, your interest will be based on your credit. Typically, business construction loans range from four to twelve percent. Of course, the smaller interest rates go to people with better credit. However, interest rates can be affected by more than just your credit score. The type of lender you choose will also play a role in the interest you pay. Typically banks have lower interest rates whereas hard money lenders typically have higher interest rates. So you should carefully shop business loans.

Business construction loans come with fees. However, the type of fees and the amount you will be required to pay will vary from lender to lender. The fee types and amounts vary by lender. However, some fees are common for most business construction loans:

  • Documentation Fees
  • Processing Fees
  • Project review Fees
  • Fund control Fees
  • Guarantee Fees

How Do Lenders Determine Eligibility?

Lenders understand the risk factors involved with business construction loans. As a result, they pay attention to a few key areas. they will look at your credit score. Lenders tend to favor business owners who have a credit score in the high six hundred and seven hundred. However, each lender will vary in their eligibility requirements as well as what they’re looking for. However, the evaluation doesn’t stop there. Lenders will look at business credit as well. Lenders will also take into consideration your business’s debt to income ratio as well. Most lenders are looking for potential business owners who have a DTI of forty-three percent our less. Logically speaking, the lower your DTI, the better.

How Do Business Construction Loans Work?

Lenders understand that the one size fits all approach can’t apply to business owners. Especially when it comes to business construction loans. Businesses are as unique as a fingerprint. Each has its unique wants, needs, and preferences. As a result, there are business construction loans to meet the wide and varied needs and preferences of different businesses. Business construction loans are unique in that they are funded differently from other loans. Conventional loans give the borrower access to the full loan amount immediately. You pay back the loan in pre-set installments over time.

Construction loans are funded in increments. As you finish each phase of the construction, you can access the funds for the next phase. The borrower works with the lender to create a draw schedule based on the smaller projects that make up the construction of the commercial property. Typically, an inspection is required after each construction phase is completed. This ensures that the work has been done and has been completed correctly. This continues until all the funds have been released and the project is finished.

One key difference between construction loans and conventional loans is how the interest rate is factored into the loan. Borrowers will only pay interest on the loans that have been funded.  For example, if a business/borrower receives a construction loan for $250,000 but has only received $100,000, they will only pay interest on $100,000. As they receive more money from the loan, the interest will be based on how much they have received. Borrowers will never pay interest on funds they haven’t received yet. In a nutshell, a commercial construction loan is set up to have the borrower pay only the interest until the loan has been fully funded.

What’s Next?

After the construction of the commercial property is complete, the loan doesn’t become due in one lump sum. Instead, the borrower can now get a commercial mortgage. As with any form of real estate, the newly constructed or renovated commercial building serves as collateral. You can use the funds from the commercial mortgage to pay off the commercial loan. The payments should be more affordable for the commercial mortgage.

Type of Loans To Research

Since we are talking about business construction loans, naturally, we will take a look at certain types of SBA loans you should know about. Besides that, let’s also look at other types of lenders you can go to.

SBA CDC/504 Loan Program

Businesses who are interested in this type of loan must meet the following requirements. The company must be comprised of fifty-one percent American owners or aliens with a green card. The business must be for-profit and NOT publicly traded. The company must operate within the US or US territories. And the business must operate in at least fifty one percent of the space. Also, the net worth of the company can’t exceed $15 million. Plus, profits for two fiscal years before applying for the loan can’t exceed five million dollars. It should also be noted that businesses that participate in real estate ventures aren’t eligible for this loan. This loan is geared for businesses that are:

  • Sole proprietorships
  • Partnerships
  • Limited liability companies
  • Corporations

SBA 7(a) Loan Program

This type of loan can be used to acquire working capital. These loans can be funded for as much as five million dollars. These loans generally require a few months to be approved, the interest is fixed, and no collateral is required. However, if you work with one of SBA’s preferred lenders your loan could be approved sooner. However, the time for approval can vary from lender to lender. The average amount of this type of loan was $425,500 in 2018.

Other Details Regarding SBA Loans…

SBA loans require a large amount of information and supporting documents for approval. These loans have enviable benefits but the approval process can be quite extensive. SBA loans will likely require you to furnish:

  • A resume
  • Business plan
  • Business credit report
  • Income tax returns
  • Financial statements: Balance Sheets, Income Statements, Cash Flow, Bank Statements
  • Accounts Receivable and Accounts Payable
  • Collateral
  • Legal Documents: Business licenses and registrations required for you to conduct business. Articles of Incorporation, Copies of contracts you have with any third parties
  • Earnings Requirements
  • Working Capital

SBA lenders want to ensure that they are funding business owners who will have the ability to pay back the loan. However, if they approve you for an SBA loan there are many benefits. SBA loans aren’t underwritten by the US Government. Lenders, community development organizations, and micro-lending institutions underwrite them and the average loan amount is near $371,000.

Bank Loans

Bank loans may be an attractive option for businesses seeking a construction loan. Although the terms will vary from bank to bank, it is possible to make a down payment for as little as ten percent. You can get fixed or variable interest rates and the repayment terms and down payment can vary. Businesses often have up to twenty-five years to repay bank-funded loans.

Mezzanine Loans

Mezzanine loans are for situations when the loan to cost ratio is lower. As a result, the business owner has to come up with more money. The loan to cost ratio is an issue. This situation occurs when building costs exceed the funds available for the project. You can use a  mezzanine loan to cover the part of the construction project for which you do not have enough funds. This type of loan is secured through stock which can be converted to an equity stake. Mezzanine loans make it possible for a business owner to fund up to ninety-five percent of a construction project.

What Type of Loan is Best for Your Business?

This question is highly specific and dependent on the goals as well as the current financial situation of your company. However, banks, credit unions, and private lenders are SBA approved intermediary lenders. These lenders offer 7(a) loans, which may be a good option for your company. SBA-approved non-profit CDC provides funds for CDC/504 loans. Banks and credit unions are a good place to shop for business construction loans.  They offer SBA loans, traditional loans, and mezzanine loans. You can also seek funding through hard money lenders. However, the interest rates for these types of loans will probably be higher. These lenders are private and usually offer short term funding. These loans usually don’t require much money upfront and usually issue funds much quicker than more conventional lenders.

The Application Process

Once you’ve decided on the lender, you will need to prepare your documents for the loan application process. Plus, you will also need to provide specific information regarding your construction project. This information includes a building plan with specs and designs. You’ll also need to provide projected expected project cost sand estimates for contractors, materials, and any other miscellaneous expenses.  They will more than likely ask for personal AND business tax returns, profit and loss statements, balance sheets, bank statements, income statements, and debt schedules.

Your credit score will also be considered.  Keep in mind that negative like bankruptcies, foreclosures, defaults on loans, and other credit blemishes will be scrutinized. Some of these negative blemishes may automatically disqualify you. As a result, it’s a good idea to provide and explanation for the negative information. This can be a lengthy process for the lender and more documentation may be required. The final steps include the underwriting process and approval.

Can I Get a Construction Loan with No Money Down?

Most commercial construction loans will require at least a ten to thirty percent down payment. However, an SBA Microloan doesn’t, although you will have to come up with collateral. The SBA offers various no money down loans that require some form of comparable collateral. If you meet the eligibility requirements, you may be able to secure a no money down loan if the amount you want to fund fits within the SBA’s microloan funding amounts and criteria.

How Much Will Poor Credit Affect Business Construction Loan Approval?

The short answer to this question is “a lot.” Bad credit is a FICO credit score of 629 or less. Business owners with poor credit are a greater risk than their business counterparts with good or fair credit. This is because they are more likely to default on a loan. This is why business owners with poor credit may find it difficult to secure a traditional loan. However, some alternative lenders may give you a shot. Keep in mind that they will probably offer you high interest rates. Also, some of these alternative lenders may look at other things besides credit when determining your creditworthiness. Those areas could include including business revenue or length of time in business. There are five alternative lenders well known for funding business owners with less than spotless credit. They are:

  • BlueVine: FICO Credit Scores As Low As 530
  • Kabbage: Alternative Qualification Requirements
  • RapidAdvance: New Businesses
  • LoanBuilder: Large Loan Amounts
  • Fundbox: Short Loan Terms

These alternative lenders stood out because they were rated highly in three areas. They include customer service, qualification requirements and loan options. These areas may be beneficial in helping businesses with bad credit narrow their search and find a loan that will meet their unique circumstances Also, it should be noted that most lenders will look at your credit as well as your business credit. Furthermore, if you haven’t established business credit your credit will be the only gauge of your creditworthiness.

Take A Final Look at Your Loan Application Before Submitting

Once you’ve decided on a lender, go over your application thoroughly. Have you answered all of the questions on the application? Have you provided all of the requested and supporting documents? Are there areas of weakness on your application that may benefit from an explanation? These are all valid questions that you should answer before submitting your application. Business loan companies will look closely at all these areas and more. However, you need to develop a keen eye for detail and tune into what lenders will be looking at as well as how they may perceive your application.

If you have any areas of weakness on your application, consider explaining. It may be a good idea to wait until they ask you before you provide the information, however. If you have poor credit or some other financial ding that may make you look like more of a risk, clear your head and put together an explanation. YOu may be able to offset some of the negativity by providing a solid explanation of how and why this area of weakness happened. See your application through the eyes of potential lenders and consider any explanations that could bring clarity to any weak spots on your application.

Closing Words

Building a commercial structure for your business is exciting. The new space your business will occupy will house the hopes and dreams of your company. As a result, it’s a good idea to know where you stand when it comes to securing funding for your company. Most Business construction loans require a down payment., as well as other constraints. Understand your why as well as the various other reasons why a construction loan is a necessity for you.

Have you outgrown your space? Has your business location suffered from some form of damage or loss? Is it time to perform renovations on your old commercial space? Regardless of the reasons, understand them and zero in on the best types of business construction loans for your company. A new commercial space is a common goal for many businesses.  However, to secure the right funding for your situation, it’s necessary to dig deep. And take an honest look at what type of funding would be best for you to pursue. Loanry can always help you connect with online lenders, if this is the road you decide to take.

Build Business Credit Before Taking Out a Business Loan

Business credit can have a significant impact on your business’s operations as well as your business’s overall reputation and standing. Positive business credit can give you access to a better credit card interest rate as well as the ability to purchase products for your business without prepaying. However, those are just a few of the benefits. Business credit is important and can help navigate day to day business issues with greater ease and more flexibility and options. However, many may question what needs to be done to build good business credit as well as specific ways their business can benefit from it.

What Is Business Credit?

First of all, business credit must be defined to create a clear understanding of what it is. It differs from personal credit in that it reflects your business’s creditworthiness and not your personal credit. However, it functions similar to personal credit in that it allows you to operate your business and acquire products and services for your business without having to use cash for everything or pay upfront. Like personal credit, business credit allows you to acquire things and pay for them over time. This can be a huge benefit when it comes to keeping your shelves stocked and your tools and other business-related machines running properly.

The Step by Step Building Process

Understanding why establishing business credit is important and as well as understanding the benefits, puts you int he perfect position to move forward with clarity and confidence. IN essence, you have developed an understanding of how business credit can move your business to the next level. Once you have this understanding under your belt, take the first step. incorporate your business. Get your federal tax ID or EIN and open your business bank account. Go a step further and get a dedicated business phone number and open a business credit file. Apply for business credit cards and establish a line of credit with your suppliers and/or vendors. All of these steps promote your business and give you traction by giving you access to funds that will help you build and grow your business.

Establishing your business and seeking credit opportunities lets other related creditors, vendors, and suppliers know that you can be taken seriously and that you’re not a risk if you honor the terms of your agreement. These simple moves have the ability to elevate your business by giving you greater access to more funding as your credit grows and matures and is handles properly. You dont have to worry about digging into your pocket to get the funding you need when you use and handle your business credit responsibly.

Why Is It Important?

There are practical reasons for establishing business credit that can have something to do with your personal credit. Establishing business credit separates your business from your personal life legally, preventing possible harm that could come to you or your assets if something were to go wrong with your business. However, if you run a sole proprietorship or general ownership, the business and the owner are one and the same. This provides no protection for the owner’s personal credit or liability. If something bad happens to the business or concerns the business, a person’s personal life is affected as well. This is one reason why many business owners opt to form a limited liability corporation or LLC. An LLC provides protection for the business owner by separating the owner’s personal life from the business. However, the benefits of building business credit don’t end there. There are many.

Other Benefits…

The importance of building business credit can be looked at in other ways as well. If you have less than perfect personal credit or other blemishes that could negatively impact your business, forming an LLC protects your business from the scourges of your blemished credit. Also, building business credit also has the ability to create credible relationships with your vendors and suppliers, allowing you to use your credit and pay for supplies and products over time. Besides, good business credit can help you to qualify for better interest rates and terms with banks and lenders.

What Types of Things Hurt Business Credit?

When you are negligent with the credit that a lender extends you by missing payments, paying late, or not honoring the terms of your loan, this hurts your ability to secure good interest rates and unsecured loans. Quite logically, you hurt your business credit when you don’t honor the terms and conditions of your lender. If you are a sole proprietor, the financial moves you make in your personal life can vastly affect your business credit negatively.

If you co-sign on a car loan for Aunt Betty and she defaults on her payments, that can vastly affect your business credit score. Regardless of the reasons, it looks like you haven’t handled your credit well.  Furthermore, maxing out your credit cards or not using your credit at all, can also reflect poorly on your credit history. These are all negative scenarios that can negatively impact your business credit. Opening too many credit accounts can also impact your business credit negatively.

The ABC’s of Business Loans

The process of getting a business loan is similar to acquiring a personal loan. You determine your business needs and how much capital it would take to provide for them, then you shop around for the loan and terms that will be most agreeable to you. However, there are several questions you should consider and answer when it comes to determining whether or not you should take out a business loan. The most obvious question to ponder is if you truly need a business loan? However, this question is linked to several others that will yield a clear answer.

Why are You Taking Out a Business Loan?

Has your business outgrown its current space? Are you in need of new equipment? Do you need to establish business credit for the future? Are you failing to meet the demands of your customers? Are you a seasonal business that needs to stay ahead of the boom? These are all pertinent questions that you should consider. More than likely, if you answered yes to any of these questions, you could probably benefit from a business loan. If there is a clear need, this is usually enough evidence as proof that you may benefit from Taking Out a Business Loan.

When You Shouldn’t Take Out a Business Loan…

You should keep in mind that Taking Out a Business Loan is only a good idea if it will truly benefit your business. If you’re taking out loans to make ends meet and your business is already floundering, you’re behind on bills, and there’s not enough revenue to support your current operations, its probably not a good idea. In essence, you’re just digging a bigger hole for yourself. In scenarios like this, you’re not really helping your business, you’re just creating more debt.

What Types Of Business Loans Are Available?

There are a variety of different types of business loans that can meet your needs. However, it requires taking a good hard look at your business to determine what it truly needs to thrive and improve. For example, if your business is in need of updated machinery, there are loans for this. You can take out an equipment loan to purchase new machinery or equipment. This is a short term loan used for the express purpose of buying equipment. These loans are similar to installment loans in that you make equal monthly payments over the term of the loan. If you don’t have a lot of business credit, this type of loan can be beneficial in helping you build your business credit. With this type of loan, the machinery or equipment that you buy is the obvious collateral.

Other Business Loans…

However, you may need a loan to cover more than just new equipment. In fact, you may not need new equipment at all. Instead, you may need a variety of different things to meet your business needs. In situations like this, an installment loan may be one of the most viable options for you. If you are taking out a business loan, installment loans give you all the money you applied for upfront. It’s a general loan that can be used for any of your business needs. The payments and interest are pre-calculated and spread out over time into equal payments. The terms can vary, however. For some businesses, taking out a business loan is best approached by acquiring a line of credit. This is a common form of business credit for many new businesses as well as businesses that have been around for a while.

Line of Credit

Line of credit loans provides a lot of flexibility to businesses. They can be either short term or long term because business owners have the option to pay off the entire balance at the end of the month or pay it off over time. This is perhaps why it’s a popular loan for many businesses. This type of loan can be re-evaluated at the end of the year and possibly renewed if the terms were followed. Line of credit loans also tends to have low-interest rates which also make them attractive. Lenders look at this type of loan as low-risk which may be a reason for the low-interest rates.

Revolving Credit

Some businesses may want to consider taking out a business loan in the form of revolving credit. These loans are very similar to line of credit loans, however, they are actually more like credit cards. These loans work by refilling once you’ve made a payment. For example, if you’ve purchased a piece of equipment that only utilizes twenty percent of your revolving loan, once you pay that amount back in its entirety, you have essentially refilled your loan. In other words, you still have the initial loan amount available for use. This type of loan tends to have a higher interest rate than line of credit loans, but more versatility.

Commercial Real Estate Loans

Commercial real estate loans are very similar to equipment loans. However, they are used to acquire commercial property for your business instead of equipment. These loans are a smart choice for businesses that are interested in Taking Out a Business Loan for the express purpose of acquiring space to run their business. Lenders are often more prone to offer better interest rates for this type of loan because it’s hard to make off with the collateral when it’s real estate. Some businesses may find it necessary to acquire a loan to pay off other financial obligations. This is called an interim loan. Once you have paid off the debt owed for your business debt, like money owed to suppliers and contractors, the funds for this loan become available for use.

Microloans

Microloans and 7(a) loans may also be needed as well. Business interested in Taking Out a Business Loan may be eligible for a microloan for up to fifty thousand dollars. These loans target small businesses and daycare centers. Disaster loans are also an option for businesses that are considering Taking Out a Business Loan. If you have experienced a loss as a business owner this type of loan can help you recoup.

The Small Business Association (SBA) and Unique Loans

Loans that fall under the Small Business Association are more difficult to be approved for. However, terms and interest rates tend to be highly favorable. However, business loans form direct lenders tend to be easier to qualify for. SBA loans are a smart place to shop for business loans because of the respect and positive terms and interest rates that they carry. Even if you don’t qualify, it’s a good idea to try. SBA also offers lines of credit for women and other minorities, franchise owners, doctors, and lawyers. Startup lines of credit are also available too.

Balloon loans are often a consideration for businesses that are considering Taking Out a Business Loan. Essentially, you pay the taxes on a monthly bases and the principal at the end of the loan. Hence the term, balloon loan. The largest payment occurs at the end of the loan. However, the payment schedule is usually agreed upon by you and the lender.

This type of loan is usually best suited for businesses that expect a huge return of revenue and have the means to pay off the principal of the loan in one lump sum. With this type of loan, lenders may require proof that your business will have the means to pay off the principal at the end of the loan.

Loan Language: Secured Versus Unsecured Business Loans

As discussed above, secured loans are loans where there is some form of collateral that functions as security for the lender. If you default on the loan, the lender has some form of payment to recoup their losses. These are usually the types of loans that business acquires initially until their credentials can justify a business being creditworthy enough for an unsecured loan or a loan without collateral.

Unsecured loans are a benefit or perk that businesses can work toward once they have displayed or shown their creditworthiness by making their payments on time and honoring the terms of the loan.

Do Business Loans Affect Personal Credit?

Business loans can affect your personal credit if you don’t have a limited liability corporation that separated your business credit from your personal credit. If you have a sole proprietorship or general ownership, the owner or owners and the business are as one. It’s in your best interest to separate the two. Separating your business from your personal credit by forming a limited liability corporation legally separates the owner or owners from his or her business.

What Steps Should a Business Take to Secure a Business Loan?

Any business owner can improve their chances of securing a business loan by doing a few simple things. Start by incorporating your business. This is a protective step for both your business and your personal assets. You should also get a federal tax ID if you haven’t done so already. This is referred to as an EIN number. In essence, this serves as a social security number for your business. You will need this important number to open a business bank account, file your taxes, and when dealing with some vendors. It’sd also a good idea to use your business bank account to pay for and conduct your business transactions. If you have a business credit card you should use your business bank account to pay your bill.

You should also get a business phone number and list it under your business name. In addition, it also helps to open a business credit profile with all three credit reporting agencies. All of these actions show lenders that you are a serious business. This looks good when it comes to Taking Out a Business Loan. If you can, establish a line of credit with your suppliers and vendors and ask them to report your payment history to all three credit agencies. This is a powerful move. Logically speaking, simply paying your bills on time is important and makes a huge statement. This is a simple move that reflects positively on your business credit.

How Do I Qualify For a Small Business Loan?

Where Can Businesses Apply For a Loan?

Business owners can apply for a business loan at a bank or credit union. These are the entities that typically provide these types of loans, although there are others. Business owners can also apply for a loan through the Small Business Association as well. SBA loans typically span from five thousand dollars to five million. The amount you can borrow is dependant on your business credit and your ability to pay the loan back. You can also look for a business loan from an online lender as well.

And you can even apply for an SBA backed loan from a bank or credit union, however, the application process is different. You will have to present proof that you are a good risk, even though SBA loans do have leniency. However, it should be noted in general, that qualifying for a business loan is more difficult than qualifying for a personal loan. However, begin with the end in mind. Know how much you want to borrow and why, and be prepared to support your requests with supporting information.

Applying for a Business Loan

Any business owner who plans on Taking Out a Business Loan should gather certain qualifying documents as proof of creditworthiness for a business loan. Of course, you will need personal identifying information, your business license, and a resume with your education, and other supportive information. You will also need financial statements from your business. The lender will indicate how far back these statements need to go. Any business credit history and personal credit history of any partners will need to be presented as well. Cash flow predictions and a guaranty form all of the business owners will also be a requirement.  You may also be asked to provide a business plan as well. However, the best solution is to be prepared for any document the lender may ask you to provide. Not all lenders ask for a business plan, but its best to have one.

The Nuts and Bolts

Know your why. Why do you need a business loan? What purpose will it serve? How will it help your business? Get clear on this. Secondly, decide on the amount you need to borrow. If you Know your why,  you can determine how much you truly need to borrow.  Dont be too modest with your request. Be realistic. How much do you truly need to borrow to accomplish your business goals? Ask for what you truly need, not less or too much more. If you’re too modest, you will fall short and fail to fully accomplish your business goals. However, if you’re too grandiose with your request, it may raise the eyebrows of lenders and cause them to question your business goals as well as your ability to pay the loan back.

Dont Be Caught Off Guard

Know your credit score and history. Dispute anything that needs disputing and have any errors removed from your report. This is a step that should be done before you apply for a business loan. Do your homework. Create a business plan. This is a road map of your business that lets lenders know what your business goals are. Keep in mind, all lenders won’t ask for a business plan. However, some will. A business plan will show your business intentions, operations, and market analysis. Lenders know what to look for when it comes to how to finance a business and which businesses are finance worthy.

Shop Around

As a business owner, you know how much money you need to borrow and why. This should help narrow your list of potential lenders. You’ll want to choose a lender with favorable interest rates. You’ll also want to look into the terms offered by different lenders. Payment schedules and options should be considered too. Ther are a wide variety of different lenders to choose from. Be sure to take your time and shop around to find the lender that’s going to best suit your needs.

Every lender will have their own way of doing things and the terms will reflect this. Keep your needs and the amount you want to borrow in mind and choose a lender that’s most compatible with your business goals. Taking Out a Business Loan or business finance is a serious matter that should be approached soberly. Do your homework when it comes to choosing the right lender. Shop business loans that make the most sense for your business. And contact us to help you. Loanry connects you with reputable lenders.

Important Documents

Lenders will want to see your financials. A business plan is a concrete summary of your business, however, lenders will want to see cold hard numbers as well. You will need to show three years’ worth of tax returns, cash flow statements, profit and loss statements, balance sheets, business financial statements, and projected financial statements.

This creates a clear picture of your business, both past, and present, and gives lenders an idea of how well your business will likely do in the future. All these documents help greatly when it comes to risk assessment. once you have everything in front of you, fill out your loan application. Make sure you do your research when it comes to what documents lenders need for a business loan. If you gather everything in time, you will go through the entire process much quicker.

Was Your Application Rejected? Dont Worry…

Rejection is a part of life. However, a lot can be learned from it. If your application for a business loan is rejected, try to figure out why. Most lenders will provide some information on why your loan application wasn’t approved. However, the reasons may be many. You may have too much debt or the industry you’re pursuing a loan for may be considered too risky. Market trends may even be a reason why your loan application was rejected. However, it still behooves you to know the possible reasons why your loan application was rejected. Once you find out the reason, you have the opportunity to rectify the situation so that your next application has a better chance of being successful.

Final Thoughts

Many businesses feel that a business loan would greatly enhance their business functions and overall operations. There are a wide variety of different kinds of business loans available to meet the many needs and circumstances you may be experiencing as a business owner. However, your business’s creditworthiness is a fundamental precursor when it comes to being approved for a business loan. Many factors can negatively impact your business credit, just as there are many factors that add to the creditworthiness of your business. Take the steps needed to put your business in the position to get the funding it needs. This requires taking a sober look at your business and determining whether or not you truly need a loan, why you need a loan, and how much you should borrow.

How to Get A Business Loan With Bad Credit?

Whether you open a business or want to expand an existing one, you at some time will likely need a business loan. Regardless of your situation, you may need a business loan with bad credit because not every business person has a credit score of 800.

Before you jump into applying for loans, let’s look at your other options. Despite where you’re reading this, as a business owner and finance writer, I will tell you that a loan should be your last resort, not your first choice. A lot of people jump at the chance to take out a loan because it seems easy. It seems like a choice that will provide them all the money, all at once.

They do not consider the interest added to the principal of the loan and how much it will add to the cost. Nor do they think about the fees. They do not consider what will happen if their business hits a rough spot and their revenue slows down. They just think, “Hey, here’s a quick way I can get the money I need.” So, before we jump into applying for bad credit business loans, let’s look at how to finance a business.

How to Finance a Business

You really have a wide range of choices in funding opportunities. You could suss out angel investors, venture capital, go public, fund your business with a cryptocurrency token, gather private investors, crowdfund or use a combination of these. Then, when you have exhausted all of those opportunities, you turn to taking out the smallest loan you need. That may mean applying for a micro loan or a standard small business loan. The best place to start for the latter in the US is the Small Business Administration. So, let’s explore each of these succinctly and you can read more about the choice that resounds most with you on your own.

Before you begin, examine your actual financial needs. You should be applying for the lowest amount of capital needed for two main reasons.

First, most organizations, especially lending institutions, loan or invest based upon your ability to pay it all back. Now, you might think, “Hey, an investor doesn’t get paid back. They don’t make a loan, so there is no interest.” Insert angry buzzer sound here. Your investors expect a hefty return on investment. They anticipate that when they invest in your firm or startup they will earn money from it. Either way you go, you should ask for the smallest amount. If it comes from an investor, you can buy them out more easily and go back to being the sole owner of the company.

Second, both lending institutions and investors recognize padding when they see it. Padding refers to when you add extra funding need needlessly. For example, when you create a line item budget and include a laptop computer with a terabyte drive, but the amount of cost you include is twice what the laptop costs. You padded the cost.

Loan officers and angel investors aren’t dumb bunnies, as my Daddy used to say. They recognize padding when they see it. They know what things cost because they look at budgets and budget requests just like yours every single day of their lives. It is the majority of how they spend their time. Your accuracy in your budget and budget discussion shows them your overall accuracy. It also reveals your honesty and transparency. Few people want to loan or invest with a dishonest liar who they have no idea how they are spending the money. Determine the smallest amount of funding you need and chase that amount with ferocity.

Despite all the preparation, prepare yourself to receive less funding than you requested. Less than half, 46 percent, of businesses receive their full funding request. If you already bootstrap your business, prepare to tighten up things further. Waste not, want not – another favorite of my father.

Angel Investors

Many startups hope and pray they’ll land an angel investor. It’s tough. Mainly, three reasons make it hard to land an angel.

  1. They like to remain anonymous.
  2. They typically do not know you.
  3. You need to already have a minimum viable product (MVP) prepared to present.

A very few wealthy individuals or families have formed investment offices to screen potential investment deals. You will need to angel investors that understand your industry and business model. You can check Angel List if you just began your firm, but if you already established, check with board members and business advisors first. Your best bet is an individual or family with whom you already have an established relationship.

Venture Capital

Established firms or startups can seek financing from venture capital (VC) firms. A VC bears close resemblance to an angel investor, except that the angel may be an individual more often than a VC would be. Typically, you will find a VC firm comprised of a group of investors with significant business experience. This firm may provide much more than funding, including:

  • strategic assistance,
  • potential client and partner introductions,
  • assistance drawing high-quality employees,
  • other business growth advisement.

Similar to the tough time landing angel investors, you’ll also find it challenging to obtain venture capital financing. You need an introduction to the VC. Most cold calls go unreturned and feeler emails get ignored. You need a colleague who knows the VC well to provide an actual face-to-face introduction.

At this introduction, you’ll have an opportunity to hit them with your elevator pitch. That refers to a 60-second or less description of your company or product. Until you can describe what you offer in one minute or less and make it sound great, cataclysmic, amazing, you aren’t ready. You also have to be able to prove what you said you deliver in that elevator pitch.

That pitch starts you on the process to getting a meeting. Simply setting up the first meeting can take weeks after your introduction. You get one shot. Go listen to Eminem “Lose Yourself” a few times before you launch into your presentation. Ah, your presentation… make it 15 minutes or less. Include tons of relevant, meaningful graphics. Bring an actual MVP with you with emphasis on the “V” for viable. You need to show the investors that you could take their money and genuinely enter production phase today.

If you do not yet have a MVP, you aren’t ready for this. Take your financials and your projections with you. Be prepared to get hit with every conceivable question. If you watch a few episodes of “Law & Order” in which the district attorney totally grills the perpetrator, you’ll have a relatively accurate idea of what this will be like. Don’t be shocked if they ask about your personal finances, too. At this level, as with angel investors, you are typically asking for a mountain of money. Between the time of your introduction and your meeting, you will be vetted. Expect full background checks.

Here’s why beyond the fact that you are asking for a ton of money. You are also adding a business partner(s). Most angels and VCs expect to either come on as a silent partner or to place a board member. They are buying into your business. Their upfront capital for your startup or expansion comes at a price. You will share ownership of your business with them. Their investment increases the your business’ creditworthiness. Landing a VC can be tough, but worthy.

Initial Public Offering (IPO)

In today’s business climate, you have a choice between methods of initially going public with your business. If you choose the traditional route, your company will offer a public sale of stock via an initial public offering (IPO). From this you will amass a group of shareholders to whom you pay dividends when revenue is good. These shareholders obtain voting rights in major company decisions. You must undergo a formal process with the US Securities Exchange Commission (SEC) which includes a not so small mountain of paperwork. The SEC also sets rules for how you can run your IPO and the regulatory environment remains complicated. IPOs only work for those with an already established business.

Initial Token/Coin Offering (ITO/ICO)

Your other option in today’s business climate is an initial coin offering (ICO) or initial token offering (ITO). This option creates and sells a cryptocurrency coin/token on a blockchain. Unlike stock, the coin or token offered on a distributed public ledger, theoretically gains value and allows the purchaser to resell it on an open market. Startups or existing businesses can use this as a method for fundraising. Depending on the type of token issued, you may have to adhere to SEC rules similar to those for an IPO. Tokens provide a great way to raise seed capital, especially for those not yet to point of proof of concept. You do need a well-researched whitepaper describing the proposed minimum viable product with a complete competition analysis. With an ICO/ITO you retain control and management since you give up no voting rights to shareholders.

Private Investors

A friendlier way to obtain funding is to take on private investors. This includes friends, family and customers that might have interest in your business. Again, you will add business partners and they can want varying degrees of control. As with VCs, the private investors add their creditworthiness to your business. You also benefit from their collateral and industry experience.

Crowdfunding

Crowdfunding has become a go to for startups. Register with any of the major crowdfunding companies to gather funds from a multitude of micro investors. You can start a campaign on Indiegogo, Kickstarter or GoFundMe. Each website uses different rules. Some require you to raise the full amount to access funds while others allow access to partial funds.

Bad Credit Business Loans

After you have exhausted all of the above possibilities, turn to the option of a obtaining a business loan with bad credit. You may by this point need to take out a much smaller loan than previously. This is awesometastic.

This will save you money in the long run. The less money you require, the less money you have to pay back. That matters even more if you have bad credit. Here’s why.

When you have bad credit, you will not qualify for prime interest rates. Prime rates, the lowest interest rates available, go to those with exceedingly great credit scores. You would need a 680 to 720 to qualify for a prime rate loan. Those are the loans that provide interest rates of ten percent or less.

Bad credit to you might mean a credit score of 300 or so. To a bank or lending institution, it means anything under 680 or so. To a bank, you’re either a sure thing or nothing. Your credit score lets them know how likely you are to pay off your loan.

Remember that when you start a business, you will not have the business’ clout or finances to back your loan. You have your own personal finances. So, if you have bad credit or no credit, you need to obtain as much of your funding from a source besides loans as possible.

Spend a little time building your credit score up. You can start this process by visiting Creditry.com. The site will help you take charge of your credit and get things under control.

You need to get copies of each of your credit reports. You will have three – one from each of the credit reporting agencies. Study your reports to determine whether each is correct.

Complete a report form for any mistakes you find. Each credit reporting agency has its own. The agency will investigate your report and make an inquiry to the organization that issued the credit information.

If it really is a mistake, the agency removes the negative information from your report. If it is not, you will have an opportunity to discuss it with the creditor and make a payment plan. Either way, you will produce the result of improved credit.

You can begin this process when you first start your business financing activities. That way, while people are checking your credit score, potential investors will see it continue to move up. When your score improves while you are applying for funding, potential investors and financial lending institutions look upon this favorably. By the time you have exhausted all other possibilities for funding, you will have an improved score and be ready to apply for loans.

You now need to determine which loan type you want. You may still need a significant amount of start up or expansion capital. In that case, you need a standard small business loan. After all the other funding pieces, you may only need a small amount. That means you could use a micro loan.

Standard Small Business Loan

As I mentioned, you can still get a business loan with bad credit. It will not provide the prime interest rate you probably hoped for, but you can obtain a business loan. Remember that unlike all the other funding types discussed which bear closer resemblance to grants, you must pay back a business loan. You are just borrowing the money. The lender will charge fees plus interest. You literally promise, via a legal contract called a promissory note, to repay the money, typically in monthly installments for a specified length of time. Depending on the loan, you may or may not make a lump sum payment at the end of the repayment period.

You can opt for an unsecured or secured business loan or a line of credit. You will probably find it simplest to obtain a secured business loan since this uses collateral to guarantee you will pay back the loan amount. An unsecured loan is much tougher to get since you have provided no promised collateral that you will repay it. The third option is a line of credit. You typically get a line of credit based upon equity in your home or business.

Shop Business Loans

You probably do not think of shopping when you think of business loans. You can shop for them though. Visit Loanry.com to use the awesome loan mall there.

You will simply need to complete a really short form with basic identifying information which will enable Loanry to match you with potential lenders. Remember, Loanry is just there to make the process easier, but Loanry does not make loans. Lenders do. Additionally, if you use a loan mall, you avoid reducing your credit score since a soft check is conducted, and not a hard one.

Loanry then may connect you to potential lenders that typically loan to individuals with your credit score and situation. It does not mean that you will qualify or obtain a loan from them. It just reduces your research time by finding potential lenders for you. You still need to fill out the loan application from each lender that’s on the list.

Do not apply for all of them at once. Go through the list one at a time. Wait for a reply. If you get turned down, you move on to the next lender. If you get a yes from a lender, you are done.

Every loan application costs money. You must pay an application fee to be considered for a loan. These can run as high as $50.

In Conlusion

You can obtain the business loan you need. It may not be easy or quick, but you can get the money. Start with the methods that do not require you to pay back the loan. Move on to business loans for bad credit only when you must. You can get your business off the ground or expanded. It takes time, effort and hard work.

 

How Do I Qualify For a Small Business Loan?

Small businesses face a lot of challenges. Most often if you have a small business, you might be the only employee. Even if you have a small staff, all the business decisions and stress are left for you. I have my own small business and I know all the stress you feel. Sometimes it is because of good circumstances, such as you have so much business that you cannot keep up with it. Sometimes, there is a downside, especially if you have a seasonal business.

It can be difficult to ride out the off season, especially in your early years. There are many times when a business needs to consider a small business loan. The thought of borrowing money that you have to pay back may seem frightening. It does not have to be, though. Borrowing money can give you the cash flow to put you in a better position. Continue reading to find out more about small business loan shopping and how to qualify for a small business loan.

What Is A Small Business Loan?

It may not surprise you that in many ways a small business loan is similar to a personal loan. I always like to break terms down into the simplest definition possible. I think it is important to make sure you understand all aspects of small business loans. You need all the information to make the best decisions for you and your business. You cannot do that if you do not understand the terms.

A small business loan is when you as a business owner requests to borrow money from a lender. The type of lender of small business loans can vary from a traditional bank, credit union, online lender, or a lender that is not a financial institution. If your business has multiple owners, then you are all requesting to borrow money for your business. You are agreeing to repay the loan by making regular payments of a set amount. The lender charges interest as a fee for allowing you to borrow money. These terms vary from lender to lender and based on your qualifications.

You agree to these terms when you sign the loan agreement. The lender sets the interest rate and the length of the loan repayment period. The lender also sets how often you repay the loan, such as bi-weekly or monthly. These terms drive how much you pay with each payment. As long as you have a fixed interest rate, the amount you repay remains the same and does not fluctuate.

Five Easy Steps To Qualify For A Small Business Loan?

There are five steps you should take to qualify for a small business loan. They are fairly easy steps, but it is incredibly important that you are sure to follow all the steps. Missing one of them, or having incomplete information, may cause a lender to deny your loan.

1. The Why

The first step is you need to think about why you want a loan. You have to determine if a loan for your business is a good idea. There are some instances when a loan is a good idea for your business. However, there are many instances when it is a terrible idea for your business to take out a loan. Later in this article, I talk about the benefits and negatives to a business loan.

2. How Much Money You Need

If you determine that a loan is right for your business, you need to understand how much money you need. It is important to make sure you obtain the right amount for a loan. If you ask for too little, you may not be able to pay all the bills. If you ask for too much, you may not be able to repay the loan timely.

 

3. Create a Business Plan

This is a key step to your business. And since it is so important, we dedicated an entire section to this topic. So keep scrolling.

4. Gather Your Financial Information

Lenders require documentation and it is important that you gather this information before you apply for the loan. You must provide both the personal and business tax return for the past three years. And you must provide balance sheets including cash flow, along with profit and loss statements. You should also have the financial statements for your business and all projected finances. Of course, the last thing you need to do goes without saying, and that is fill out an application.

What Documents Do Lenders Require For A Business Loan?

5. Know Your Credit Score

You should know your credit score. Pull your credit report and take a look at its contents. This is what a lender see when determining if you qualify for a loan. If you know what is on your credit report, you can correct any errors it contains. You also know your credit score and have a good idea of what type of loan for which you qualify. This also helps you shop business loans to find the perfect lender for you.

What Is Considered A Small Business?

Before you can determine if you qualify for a small business loan, you must understand what counts as a small business. I should tell you that the government defines small businesses in a document that is close to 50 pages. Do not worry, I am not going to reproduce all those pages here. I am going to give you the condensed version. It is typically the number of employees and the type of business that defines whether or not you have a small business.

A Sole Proprietor

Instead of focusing on the type of business you have, I want to focus on the organization of small businesses. One of the common categories of small businesses is a sole proprietorship. It is easy to create and has a fairly simple structure. The easiest definition is when you are doing work in which you receive a payment, but you are not an employee of another person, or business, then you are a sole proprietor. Consultants, freelance writers and entertainers are a great example of this type of business. You get to make all the business decisions for yourself. That also means that all the profits and losses are yours, too. There is not much paperwork for you to fill out, except an additional form or two when you file your income taxes.

Partnership

A partnership has two or more owners of the business. This is similar to a sole proprietorship, except more people are making decisions. That certainly can complicate the daily operation of your business. With a partnership, you can distribute the liability in varying ways. You can have a limited partnership where one of the partners has more liability for the negative aspects of the business. Those partners with limited liability also have limited control. You can create a limited liability partnership where all partners have limited liability. This protects all partners from taking on the debts of the company. When there are multiple people making decisions, it is smart to protect yourself.

More About Small Businesses

There are few more businesses that can qualify for a small business loan. One of those types of businesses is a limited liability company (LLC). This type of business organization protects the owners from the liability of the business, but allows the owners to enjoy the benefits of being taxed as a sole proprietor. This means if your business begins to tank and losses money, lender cannot touch your personal items. The organization is a separate entity for you personally.

Corporations are a business that is completely separate from the owners of the business. Each individuals of the business are not held liable for any of the actions the business takes, including loss and liability. This type of business requires a lot of paperwork, more than just a few extra income forms. There are some additional tax requirements associated with a corporation. The corporation pays taxes on profits and on the dividends that the shareholders receive. Each shareholder must report all profits from the business on their own tax returns. Corporations are able earn money by selling stock.

Another type of corporation is a S Corp. S Corps avoid paying taxes twice on their own profits and again on the shareholder dividends. This type of business does not pay taxes on the business profits. Shareholders pay taxes on the profits on their personal tax returns. Those in a S Corp benefit from limited liability similar to a LLC. S Corps have a limitation on the investors and stockholders they can have. They cannot have more than 100 shareholders with one stock.

Do I Need Collateral To Get A Small Business Loan?

You probably are not going to like this answer, but you might need collateral to get a small business loan. It really depends on your credit score, the loan’s purpose, and if you have a relationship with the lender. If those things are in shaky standing, you may need to provide collateral. Any collateral you use must be valuable to the lender. Just because something may be valuable to you does not mean a lender appreciates it. Please keep in mind, if you put something up as collateral and you do not pay the loan, the lender will take that item. It does not matter if it is your personal house, the lender will take it. This may allow you to get a lower interest rate, but it may not a chance you are willing to take.

Lenders do not want to take your item. They would much rather that you pay your loan on time. For the lender to get money from the collateral item, the lender must sell it. That takes time and effort and possibly a little money. It is easier for both you and the lender when you repay your loan.

Will I Have A High Interest Rate?

When it comes to interest rates for a small business loan, your credit score matter. Not only does your business credit score matter, but so does your personal one. Do not feel distress if you do not have the best credit. Times have changed and in the past less than perfect credit meant that you could not get any type of loan. Today, you can get loans with bad credit, but you may have to do some research first. You can even get small business cash loans when you do not have the best credit, but most likely you will have a higher interest rate.

Lenders have some freedom and flexibility when deciding what interest rate to give you when you apply for a loan. You should shop around and do some research on the possible lenders and what type of interest rate they can offer you. You should look at online lenders. Do not dismiss them. There are many reputable online lenders and you may be able to find a deal that works best for you.

Pay attention to all the details of the loans that are available to you. Look at the length of the loan, the amount you can borrow and how often you must make payments when it comes to loans. All of these items should factor into your decision. If a lender is not offering you the best interest rate, but their other terms are much better, you may want to go with that lender. After you have built some trust and credit with the lender, you may be able to renegotiate your loan for a better interest rate.

Do I Need A Business Plan?

Yes, if you have a small business, you need a business plan. Even if you have no need for a small business loan, a business plan is the most important thing you can do for your business. A business plan is the roadmap for your business. How can you achieve results, if you do not know what they are? In short, a business plan is an outline of the goals for your business. It is a detailed description of how you plan to achieve those goals. It does not have to be long but you should have a formal document. You must have a written plan. It is great if you have all of these ideas in your head, but getting them on paper makes them real.

Once you have them written, you can share them with potential lenders and investors. You can print them and hang the where you can see them. They can be a reminder of your goals, especially during a time when you forget them. Your business plan can be a living document, which means it can change. As your business grows, you may expand or change your goals and your business plan changes. You may achieve results faster than expected which changes your timeline. You may hit snags along that you for which you did not plan. This may also change your plan.

You should make sure that your business plan includes an executive summary, an overview of your company, and your marketing plan. And you should include a detailed description of the financial plan of your company. You should provide a listing of the milestones for your company. Be sure to include information about your company and the services or products it provides. You might also want to include a short bio of anyone in management of the company and information of their role within the company.

Positives To A Small Business Loan

There are many reasons why you might want to consider a small business loan. Typically one of the most common reasons why your business may need a loan is because you need to expand. This expansion could mean that you need a large space because you have outgrown your current space. Perhaps you have more work than you have people and you need to do some hiring. You could have many orders you need to fill and you have to purchase more supplies. It is also possible that you need some new equipment or computers to make your business more lucrative.

These are all great reasons why you might need a loan. If borrowing money is going to put you in a better position to generate more revenue, then it may be a great idea. Even if you have the cash to pay for these items, you still might want to consider a loan. This helps you save your cash reserves and not dig into them. This can also help you build positive credit. All of these are positive reasons why you should consider a loan. Anything that can help you and your business grow and helps you find positive momentum should be great for your business.

Negatives To A Small Business Loan

There may be just as many reasons why you should not consider a small business loan. One of the major considerations when thinking about a small business loan is can you afford to repay the loan. Are you currently falling behind on your bills, or close to falling behind on your bills? If so, you may not want to consider a loan. Taking on a small business loan may not be the best idea for your business. You should also take a good look at why you want the loan and how it fits into your business plan. Have the circumstances around your business changed requiring you to take a hard look at your existing business plan? If your business requires a loan for reasons other than fast growth, you may want to think about the direction in which you want your business to go.


Do Small Business Loans Have Fees?

Yes, most small business loan lenders charge fees. The fee schedule and reasons for the fees may change from lender to lender. You should read the entire loan agreement, even the fine print, before you agree to and sign anything. A lender is required by law to disclose to you all the fees they charge. Most lenders charge late payment fees. I am sure you do not plan to make late payments. Sometimes, things happen that may cause you to make a payment late. You should be aware of those charges in the event that something happens. Some lenders may not charge a direct fee, but instead charge you additional interest.

You should ask the lender when they consider the loan is in default. When you default on a loan, it means that you have not paid the loan. Some lenders consider one missed payment to put your loan in default. Other lenders do not consider you to be in default until you go several months without paying your loan. You should find out upfront what you lender considers default. You should also find out what the lender does when they consider you in default. Some lenders charge an early termination fee. This occurs when you pay the loan in full early. Some lenders do not like when you pay the loan early because it may take money away from them. You should confirm this before you sign any documents.

How Does My Credit Impact A Small Business Loan?

You credit score makes a difference on any loan, including a small business loan. It is important that you have a clear understanding of you credit score before you apply for a loan. This can help you determine which lender is the best one for you. You should pull your credit report to see what it contains. If you have a low credit score, many lenders will give you a high interest amount. Lenders tend to see you as a high risk when you have less than stellar credit. Your credit history shows the lender a picture of you as it relates to credit worthiness. The lender can see if you have a late or missing payment history.

A typical credit score is anywhere from 350 to 850. Most people have a credit score between 600 to 750. Good credit falls between 670 to 800. Anything below 570 is the danger zone of bad credit. When you have bad credit, it is much harder to get a good interest rate. You may find it is difficult to be approved for a loan, if you have bad credit. It is still possible to get a loan, but you have to work harder and do more research.

Is There Anything Else I Should Know About Small Business Loans?

There may be a few more things you should know about a small business loan before you take the plunge. There are few terms of which you should be aware before you sign the loan documents. The full amount of the loan you borrow is called the principal. The lender adds interest on to the principal of the loan to calculate the full amount of the loan you must repay. The length of time between when the lender gives you the money and when the loan principal and interest must repaid by the borrower to the lender is called the loan term.

The APR is the annual interest rate that is given to you as a percentage. You will commonly hear interest referred to as an APR. A small business loan also has a factor fee. This is a different way of stating interest that is charged on a percentage of the amount you borrow. You may also hear of it referred to as a factor rate. This is most common with short term business loans.

Conclusion

I have given you a lot of information about a small business loan. There are many things for you to consider when thinking about a small business loan. The most important of which is why do you need the loan and how do you plan to use it. This can help you determine if you really should take out a loan. You want to make sure that any type of loan you obtain for a lender is going to benefit your business.

Just like a personal loan, you do not want to take on a loan that you cannot afford to repay. You can put your business in a sticky situation if you cannot afford to repay the loan. You do not want to overextend your business and take on more debt than you can afford to repay. There are many good reasons why you might want to consider a loan for your business. You just need to make sure that you are making the right decisions for your business and its needs.

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The Ultimate Guide to Small Business Loans in California

If you have a small business in California, you may be in a position where you are considering small business loans. No matter in what state you are operating, a business loan can help your company expand to the next level. Small businesses have challenges that are unique to them. Almost half of businesses get additional funding from traditional large sized banks, while others use nontraditional lenders. This guide explains all everything you need to know about small business loans in California, including how to start small business loan shopping.

What Is A Small Business Loan?

In many ways small business loans are like personal loans. If you are considering a small business loan, it is important that you have a full understanding of small business loans. To be able to make the most informed decisions, you need to understand all aspects of small business loans. To do that, I like to break terms down into the simplest definition possible.

A small business loan is when you as a business owner requests to borrow money from a lender. Lenders for small business loans vary from a traditional bank, credit union, online lender, or a friend or family member. If your business has multiple owners, you all are requesting to borrow money for your business. You are agreeing to repay the loan by making regular payments of a set amount. The lender charges interest as a fee for allowing you to borrow money. These terms vary from lender to lender and based on your qualifications.

The loan agreement outlines all of the terms of your loan and you are agreeing to it when you sign the contract. The lender sets the interest rate as well as the length of the loan repayment period. The lender also sets how often you repay the loan, which could be bi-weekly or monthly. These terms drive how much you pay with each payment. As long as you have a fixed interest rate, the amount you repay remains the same and does not fluctuate.

Small Business Loans in California

There is a slight benefit to obtaining small business loans in the state of California. They tend to be easier to obtain and the terms are more clear. When operating a business in California, you can rest assured that your lender is giving you all the information you need. There is a new law in California, SB 1235, that requires all lending to small businesses be complete transparent. The state of California likes to encourage the growth of small businesses. Over 90 percent of the businesses in California are considered small businesses. Most of those businesses borrow money in amounts less than $100,000.

There are about 10 companies that specialize in providing loans options in California. Each of these loan options have parameters which your business needs to fit to be eligible for the loan. Those parameters may vary between number of employees or location within the state of California.

What Is Considered A Small Business?

Before you can determine if you want to consider small business loans, you need to understand if your business is truly a small business. The government closely regulates the definition of small businesses and the document is around 50 pages long. The easiest way to determine if you have a small business is look at the number of employees in your business. The type of business and number of employees defines you business as a small business or not.

I want to focus on the organization of small businesses. A common category of small businesses is a sole proprietorship. It has a simple structure which is easy to create. An easy definition of a sole proprietorship is when you are doing work in which you receive a payment, but you are not an employee of another person, or business. Consultants, freelance writers and entertainers are a great example of this type of business. You are responsible for making all the business decisions. That also means that all the profits and losses are yours, too. There is not much paperwork for you to fill out, except an additional form or two when you file your income taxes.

A partnership is a business with two or more owners. This is similar to a sole proprietorship, except more people have the ability to make decisions. That certainly can complicate the daily operation of your business. With a partnership, you can distribute the liability in varying ways. You can have a limited partnership where one of the partners has more liability for the negative aspects of the business. Those partners with limited liability also have limited control. You can create a limited liability partnership where all partners have limited liability. This protects all partners from taking on the debts of the company. When there are multiple people making decisions, it is smart to protect yourself.

What Is The Difference Between A Short Term And Long Term Loan?

There is an obvious difference between short term and long term small business loans. That is the amount of time you have to repay the loan. Short term loans must be repaid anywhere between several months to several years. It is sort of like buying a car. You are financing a decent amount of money for a short period of time, usually three to five years. If you can afford to make the payments, it may be worth it to you to get a short term loan. You pay the money back fairly quickly. You also build up positive credit.

Short term loans are typically small amounts. However, keep in mind, that is a relative term. If your business earns $500,000 a year, then 100,000 may seem like a small amount to you. If your business only makes $20,000 then $3,000 may seem like a small amount to you. It is all about the perspective of your business. Lenders may want you to repay short term loans weekly, or biweekly instead of monthly. You can negotiate those terms with your lender.

Long term loans typically mean you are borrowing much larger amounts of money for a longer period of time. It really depends on the nature of your business. You may need money to build a new building or purchase expensive equipment. You may need longer than five years to pay the money back to the lender. This type of loan more closely resembles a mortgage. These loans cover a broad range of needs for your business. If you are interested in a long term loan, you should shop business loans now to make sure you are getting the best deal. You are invested in paying back this loan back for a long time, you want to make sure it is the best loan for you.

What Is A SBA?

small business administration (SBA) loan is a loan that is backed partially by the Small Business Administration (SBA) branch of the government. These types of small business loans are less risky for the lender because it is partially guaranteed by the government. The loan is still issued by a lender. If you cannot repay the loan, the SBA covers the part of the loan that they backed. It is almost like insurance for the lender.

The terms of this type of business loan varies based on the individual loan. There are no additional limitations on this type of loan because of its backing by the SBA. These loans range in amount from $500 to as much as over $1 million. They also can offer an interest rate as low as just below 7 percent. The repayment terms for a SBA range from 5 years to 25 years. The typical length of this kind of loan typically is around 10 years.

There are four different types of small business administration loans. There are micro loans, which are typically available to childcare organizations and small businesses. These loans are usually up to $50,000. Disaster loans fall into this category and they are reserved for damage sustained from natural disasters, such as, but not limited to hurricanes and flooding. There are real estate and equipment loans covering those items that are needed for the business to operate. Also, there is an all purpose small business loan that is the most common loan and that is the 7(a) loan. There are many business loan companies available to provide these various loans.

What Is Revolving Credit?

Revolving credit is a term typically related to credit cards. That is most likely where you have heard the term. It can be associate with small business loans, as well. The basic concept remains the same. You are not taking out a loan, per se. When you take out a loan, it is for a certain amount. The lender deposits that money into your bank account. You are responsible for paying it all back plus interest regardless if you use the money or it continues to sit in your bank account. The lender tells you how much you have to pay per month and for how many months. The lender is using the full amount of the loan plus the interest divided by the number of months you have to repay to get that number.

When it comes to revolving credit, it works slightly differently. A lender approves you for a certain amount over a specific period of time. However, you do not have to use that entire amount. It is not deposited into your bank account. It sits in the bank’s account. You take what you need when you need it. You only have to pay back what you borrow. The amount you pay each month is based on how much of the money you are using. The lender tells you how that amount is determined before you sign the agreement. Often, the interest rate is higher when it comes to a line of credit, but it gives your business much more flexibility.

What Documents Do I Need To Get A Small Business Loan?

As with any type of loan, you need to provide documentation when applying for small business loans. You have to supply more documents for a business loan than you do for a personal loan. The lender really wants to know all about your business before approving you for a loan. They also want to ensure that your business is profitable. They do not want to give you money if you are not investing it back into your business in a way that makes good business sense. I am sure it will not surprise you to know that the lender will not just trust you, they want to see the proof. You should have as much of this documentation available as possible before you apply for a loan. It can help expedite the process.

A lender may actually ask to see your resume and business license. You may have to provide your personal financial statements and the financial statements for the business and any principals that you have. They want to gather the credit history for you and all your partners, in addition to the credit history for your business. Lenders also want to see a guarantee of repayment from all the business owners. And they also want to see tax returns for you and the business for the past three years. They are especially interested in profit and loss statements. That means they want to see your balance sheets and all projections on cash flow. And they also want to see financial statements and any projected financial statements.

What Documents Do Lenders Require For A Business Loan?

How Do I Know It Is Time For A Small Business Loan?

There are many reasons why small business loans may be right for your business. One of the most common reasons why your business may need a loan is because you want to expand. An expansion could mean a larger space because your business has outgrown the current space. You may have more work than you have people and need some new hires. You could have many orders you need to fill and you have to purchase more supplies. It is also possible that you need some new equipment or computers to make your business more lucrative.

These are all great reasons why you might need a loan. If borrowing money is going to put you in a better position to generate more revenue, then it may be time for a small business loan. Even if you have the cash to pay for some of these items, you might want to consider a loan. This helps you save your cash reserves and not dig into them. This can also help you build positive credit. All of these are positive reasons why you should consider a loan. Anything that can help you and your business grow and helps you find positive momentum should be great for your business.

What Do I Need To Consider When Thinking About A Small Business Loan?

There are some things you should consider before plunging into small business loans. You may ultimately decide you want small business cash loans, but first you should consider these steps.

  1. The first step is you need to think about why you want the loan. Is it a good idea your business? There are some excellent reasons when a loan is a good idea for your business. There are just as many reasons why it is a terrible idea for your business. You must consider if your reasons fall into the good or bad idea. Be honest with yourself. You may be putting your business at risk if you do not make a smart decisions.
  2. If you determine that a loan is right for your business, you need to be clear on how much money you need. It is important to make sure you obtain the right amount for a loan. If you ask for too little, you may not be able to pay all the bills. If you ask for too much, you may not be able to repay the loan timely.
  3. You should know your credit score. I talk more about this in the next section.
  4. Make sure your business plan is solid. This is a key step to your business. I go into more detail about business plans later in the article.
  5. Gather the financial documentation I talked about a little earlier in the article. It is not too far above this section if you need to go back and read it again.

Does My Credit Matter?

Your credit always matters. It does not matter if you want small business loans, personal loans, or even car insurance, your credit makes a difference. There are many sites available to assist you with pulling your credit report and analyzing the information it contains. You should pull your credit report and take a look at its contents before you apply for a loan. This is what a lender sees when determining if you qualify for a loan. If you know what is on your credit report, you can correct any errors it contains. You can also prepare yourself for how a lender may react to your credit report. This also helps you shop for the best loan for your business.

If you have a low credit score, many lenders will give you a high interest amount. Lenders tend to see you as a high risk when you have less than stellar credit. Your credit history shows the lender a picture of you as it relates to credit worthiness. The lender can see if you have a late or missing payment history. A typical credit score is anywhere from 350 to 850. Most people have a credit score between 600 to 750. Good credit falls between 670 to 800. Anything below 570 is the danger zone of bad credit. When you have bad credit, it is much harder to get a good interest rate. You may find it is difficult to be approved for a loan, if you have bad credit. It is still possible to get a loan, but you have to work harder and do more research.

Do I Need A Business Plan?

Yes, if you have a small business, you need a business plan. Even if you have no need for small business loans, a business plan is the most important thing you can do for your business. It is the roadmap for your business. How can you achieve results, if you do not know what they are? In short, a business plan is an outline of the goals for your business. It is a detailed description of how you plan to achieve those goals. It does not have to be long but you should have a formal document. You must have a written plan. It is great if you have all of these ideas in your head, but getting them on paper makes them real.

Once you have them written, you can share them with potential lenders and investors. You can print them and hang the where you can see them. They can be a reminder of your goals, especially during a time when you forget them. Your business plan can be a living document, which means it can change. As your business grows, you may expand or change your goals and your business plan changes. You may achieve results faster than expected which changes your timeline. You may hit snags along that you for which you did not plan. This may also change your plan.

You should make sure that your business plan includes an executive summary, an overview of your company, and your marketing plan. And you should include a detailed description of the financial plan of your company. You should provide a listing of the milestones for your company. Be sure to include information about your company and the services or products it provides. You might also want to include a short bio of anyone in management of the company and information of their role within the company.

Where Should I Look For A Small Business Loan?

When you are considering small business loans for your company, you must understand your company’s needs. Once you determine that, it might help you decide which is the best loan for you. It can also help you find the right lender for you. You should always do some research. There is so much information available to you online, there is no reason why you would not.

Remember, there are many options for small business loans, even online lenders. There are always the traditional banks available to you but they may not be flexible when it comes to the loans they provide. You may have better luck with credit unions of online lenders. They tend to be a little more willing to work with you and your business.

In California, you have some unique options when it comes to small business loans. The Los Angeles County Community Development Commission/Housing Authority has a loan to small businesses that specialize in areas such as manufacturing, clean tech, medical, and transportation development. The Valley Economic Development Center offers three different types of loans to small business owners in California. There are many more loan opportunities available. You just have to do some research to find them.

Conclusion

I have given you a lot of information to consider as it relates to small business loans. The one thing I would caution you to seriously consider before moving forward with a small business loan in California or any state is make sure you can repay the loan. This really is an important piece of information. You must be able to repay the loan. If you cannot repay the loan, you are putting yourself in a bad position. You are putting your business in a bad position. You do not want to set your business up for failure by taking on a loan that you already know you cannot repay.

Give serious consideration to how much you can afford to pay in a loan each month and do not go over it. We all have big dreams about what our business can achieve, but do not base your ability to repay the loan on money you hope to earn in the future. Use the income you are generating now to repay the loan. If you have more income soon, that is great. You can repay the loan sooner, or invest the money back into your business. But, you already know that you can repay the loan based on your old income. Always make smart, well educated decisions when it comes to your money.

What Documents Do Lenders Require For A Business Loan?

If you are a business owner, you will most likely have a moment when you consider a business loan. There are many reasons why you may consider a business loan. You may be just starting your business and need some money as your disposal. Perhaps you have a long standing business, but you are growing quickly and you need to expand. Just like there may be many reasons why you need a loan, there are many details to consider. This may be the first time you have considered taking out a loan for your business. Just like with a personal loan, you should carefully consider your options. You should not enter into a loan agreement without making sure it is the right solution for you. In this article, I share all the details you need to know about a business loan, including all the documentation you need.

What Is A Business Loan?

I always like to start with basic information. It is a mistake to think everyone knows about the business loan process. Really, unless you are some heavy duty business person, chances are, you are not up on the details of business loans. In the most basic definition, a business loan is when a lender allows you to borrow money to help you run your business. The lender charges a fee, also known as interest, for giving you the money. You promise to repay the money by making monthly payments for the length of the repayment period.

Business loans can be secured or unsecured. They may also be a line of credit. Similar to a personal loan, an unsecured loan has no collateral or anything backing it. These loans are riskier for lenders. As a result, they have higher interest rates. A secured loan has collateral attached to it. That means you have offered something of value, such as your business or pieces of it, to ensure you repay the money. If you default, or do not pay, on the loan, the lender can take your collateral. A line of credit works similarly to a credit card. You can borrow any amount up to the line of credit. You do not have to use the full amount of the line of credit.

How Do I Get A Business Loan?

The first thing you must do is understand why you want or need a business loan. You must have a purpose for the money. Thinking about this can help you decide if you really need the money, or if you are putting your business at risk. After you decide that, yes, a business loan is right for your business at this time, be realistic in how much money you need. Most importantly, determine if you can repay the loan. A loan is not a gift. It must be repaid every month.

Now that you are sure you want to pursue a loan and you know the amount you need. You are also sure you can repay the loan, it is time to find a lender. There are many lenders out there and it is important to find the one that fits your needs best. Lenders offer different types of loans with varying interest rates. That interest rate impacts your monthly payment amount. Lenders may have different loan terms, also. It is important to find a lender that matches those requirements for you. You may have to do some research. Do not pick the first lender upon which you stumble. Look around and do some research to find the right one for you.

Once you have taken all of those steps and found the perfect lender for you, it is time to fill out an application. You are almost finished with the process at this point. Depending on the lender you choose, you may have to go into the bank and fill out a paper form. If you choose an online lender, you can fill it out on your computer. It is important that the information you provide is accurate. If anything is off it could impact the decision. It make take a couple of weeks before you receive a response from the lender.

What Documents Do I Need?

One thing I did not mention above is the documentation you need when applying for a business loan. As with any type of loan, you must provide documentation when applying for a business loan. I am sure it makes sense to you that potential lenders like to see that your business is profitable. Lenders want to make sure you are investing wisely into your business. Usually a lender will not just take your word for it. They would like to see documentation to prove it.

Some information a lender may ask to see is your business license and resume. They may want your financial statements and the financial statements for the business and any principals that you have. They want to gather the credit history for you and all your partners, in addition to the credit history for your business. Lenders also want to see a guarantee of repayment from all the business owners. Lenders also want to see tax returns for you and the business for the past three years. They are especially interested in profit and loss statements. Also, they want to see your balance sheets and all projections on cash flow. They also want to see financial statements and any projected financial statements.

How Can I Use A Business Loan?

Business face unique challenges. One of the biggest struggles is getting others to believe in your vision the way you do. Not only do you want them to believe in it, but you typically would like some financial backing. In the event, you are not able to persuade people to just give you money, you may need to consider a business loan. The good news to this is you can use a business loan for just about anything for your business. Depending on the type of business loan, you may need to use it for specific pieces of your business. However, that is only if you opt for a specific type of loan, such as an equipment loan. You can use a business loan for upgrading your software or computer equipment. Or you can purchase real estate or a larger building. You may even need it to hire more employees.

No matter what type of loan you consider, you should have a business plan. Many lenders ask to see your business plan because they want to ensure you have a plan. They want to make sure their money is going to grow your business. It is possible that a lender does not require you to have a business plan, but it always a good practice to have one. This helps you understand your goals and provides you steps to move forward.

What Are Small Business Administration (SBA) Loans?

Резултат слика за sba loans infographic

There many types and variations of a business loan in which you could apply. One of those types is a small business administration (SBA) loan. It is a loan that is backed partially by the Small Business Administration branch of the government. These loans are less risky for the lender because it is partially guaranteed.  The loan is still being issued by a lender. It is not issued by the SBA, even though the name of it makes you think it might be. If you cannot repay the loan, the SBA covers the part of the loan that they backed. It is almost like insurance for the lender.

The terms of this type of business loan varies based on the loan. There are no additional limitations on this type of loan because of its backing by the SBA. They range in amount from as low as $500 to as much as over $1 million. They also can offer an interest rate as low as just below 7 percent. The repayment terms for a SBA range from 5 years to 25 years. The typical length of a loan is around 10 years.

There are four different types of small business administration loans. There are micro loans, which are typically available to childcare organizations and small businesses. These loans are usually up to $50,000. Disaster loans fall into this category and they are reserved for damage sustained from natural disasters, such as, but not limited to hurricanes and flooding. There are real estate and equipment loans covering those items that are needed for the business to operate. Also, there is an all purpose small business loan that is the most common loan and that is the 7(a) loan. There are many business loan companies available to provide these various loans.

What Are Equipment Loans?

An equipment loan is a special type of business loan that helps businesses purchase heavy machinery or large equipment. When your business uses an equipment loan to make large purchases, it allows you to save cash. Instead of using large amounts of money now, you can make a monthly payment. Typically, you can only get an equipment loan for a piece of equipment that you are purchasing. You cannot use it on existing equipment. You are using the equipment that you plan to purchase as collateral. That means if you default on your loan, the lender can take possession of the equipment. This gives the lender a little more security in lending you money.

Typically, lenders prefer that you invest in equipment that retains value. Equipment such as semi trucks, tractors, and cranes fall into this category. You may also be able to use this type of loan on ovens and other kitchen equipment for a restaurant. You may also consider equipment such as computer printers and servers, or equipment for manufacturing. There are many benefits to an equipment loan. Lenders often require less documentation than with other loans. You typically get an answer in less than a week, so you can have money quickly.

What Are Term Loans?

Another type of business loan is a term loan. It is the most popular loan of all the business loan types. This type of loan helps business owners procure items that are a large expense that they may not have the cash to pay. These loan covers a large amount of items. These loans can also help improve the credit rating for a business. Whenever you may regular and timely payments, it helps increase your credit score. It may be difficult for a business to have a good credit score. In some cases, a term loan may help.

Nontraditional and traditional lenders provide term loans. These loans are similar to personal loans in that they are for a set term. They are not revolving lines of credit. The length of these loans are usually from one year to five years. You make regular payments on these loans. They can be monthly, or possibly weekly payments. These loans are flexible and easier for a well established business to obtain.

Lenders prefer to give these types of loans to businesses that have been operational for two years. Lenders like to see that the business is solvent with a sound debt to income ratio and continues to have a steady flow of revenue. New startup businesses may find it difficult get an approval for this type of loan. Interest rates vary widely, as they can be as low as 6 percent and as high as 30 percent. Lenders tend to require a large amount of documentation before approving businesses for this type of loan.

What Is Revolving Credit?

Revolving credit is a term with which you should be familiar if you use credit cards. This type of business loan closely resembles credit cards and works in a similar way. A line of credit is a preferred way for businesses to obtain credit. It gives your business much more flexibility. This allows your business to have the money you need when you need it. You are given a set amount of money and you are able to only take as much money as you need. You can continue to borrow money against your line of credit until you reach your limit, or for a set amount of time. Those terms are decided at the time you agree to the loan.

The interest rates for these types of loans are higher than other loans. However, you only have to pay interest on the amount of money you are using. You do not have to pay interest for money that you are not using. Lenders tend to approve these loans for business with good credit.

Why Should I Get A Business Loan?

You and your business associates are the best ones to decide if a business loan is right for you. There are some points to consider when deciding if a business loan is right for you. First, let us look at the reasons why you might want to go to a business loan shop. Are you in a position where you need to expand, but your current space cannot handle anymore people or equipment? If you can show that you have had steady growth for several years, it can help your chances for an approval. Perhaps you need more equipment or you need to upgrade your existing technology.

If upgrading your existing system helps improve your productivity, which can in turn bring in more income. Do you have a seasonal business and you need to stock up on items you need for the next season? If you do not have a steady flow of income at this moment, a loan may help you obtain the items you need. Perhaps you need to build up your credit. You may not have any credit because you are a new business, or your business do not have the best credit. Obtaining a loan may help you build positive credit. Any of these reasons may be a valid reason for obtaining a loan.

There many be just as many reasons why you should not obtain a personal loan. Are you already behind on all of your bills? Or are you in danger of falling behind? Perhaps you do not have a good business plan. You may need to revisit is and make adjustments to your business plan before you consider taking out a loan. It is important to have an understanding of the position of your business. You should realistic about the circumstances of your business. It is great to be ambitious about your business plan and know how much you are able to achieve.

Can I Be Denied For A Business Loan?

Yes, you can be denied for a business loan. It is probably more common that you realize. You could be denied because you may currently have too much debt. You may also be denied because you have limited cash or you may not have enough collateral to put towards the loan. It could also be that a lender does not want to take a risk in the current market. If the market is in too much turmoil, a lender may not take the risk. You may have poor to bad credit history or a terrible business plan.

If you want to ensure that you are approved for a business loan, you should make sure you have better cash flow and work to improve your credit. You may also want to consider non traditional lenders. You may have better luck with a lender that is willing to lend money to a business that has less than perfect credit. If you know that the market is not in a good place, you might want to wait until the market is in a better place. You can watch the market for when there is a better market in which you can apply for a loan. If you are denied a loan, find out why. Pay attention to what the lender tells you. Make corrections where you can and apply for a loan when your business is in a better place.

Are There Downsides To A Business Loan?

There can always be a downside to a business loan, but it depends on your position when you obtain the loan. One of the major downsides is your business is taking on more debt with a loan. You could put your business is a bad financial position if you enter into a loan that you cannot afford. Remember, you should always have a realistic picture of your financial position before you obtain a loan. You should have a clear picture of the budget for your business. This means you need to know how much money you are spending on expenses.

This also means knowing how much money you really make, not how much money you think you should make. Now, is the time for you to look at the cold hard facts and numbers. If you do not have a budget for your business, you should create one now. Do not hesitate with creating a budget. There are many websites available to you to help you create a budget. Before you even start to shop business loans, you need to understand how much you can afford to pay per month.

The last thing you want to do is risk losing your business. This is your dream and you have worked hard to create it. Do not let a bad financial decision ruin that for you. Do not be your own worst nightmare, either. If you remain realistic about your current position and where you can go, you have a chance to survive. If you begin to believe your business brings in more money than it actually does, you might set yourself up for ruin.

Pros and Cons of Small Business Loans: Steady Growth

What is the Major Difference To Long And Short Term Loans, Besides The Obvious?

When you are considering a business loan, you have some choices available to you. Among those choices is the short term versus long term loan decision. I am going to make an obvious statement, here, so forgive me. A short term loan means you have a short term in which to repay the loan. You may have to repay those types of loans in days, weeks, and possibly months.

Short term loans put a large amount of pressure on you as the business owner as you try to repay the loan. You may have to dig into your cash reserves to pay back a short term loan. The original purpose of the loan was probably to keep your cash in place. A short term loan must be repaid in three months to eighteen months. If you need money for a short period of time and can repay the loan quickly, then a short term loan may be the right one for you.

Long term business loans are repaid in monthly payments over the term of the loan. This relieves the pressure on business owners because they tend to have one to twenty-five years to repay the loan. The lender you choose determines the terms of the loan. While the long term loan accrues more interest than a short term one, it also spreads out the interest over a longer period of time so you are not scrambling to repay the loan. If you would like to spread the repayment plan over a longer period of time and you do not mind paying more interest, the long term loan may be a better option for you.

Conclusion

When you are looking for a business loan, it is important to understand the position of your current financial outlook. You want to make sure that you are in a position to repay the loan. Before you start looking at a business loan shop, take a look at your business plan and your expansion plan and ensure that it makes sense. If your business has positive revenue and it continues to grow each year for at least the past five years, you might be in a good position to obtain a business loan.

If you are behind in your bills, or in danger of becoming behind in your bills, you might want to reconsider obtaining a business loan. The intention of a business loan is to put your business in a better position so you can expand your business by obtaining a large space or upgrading equipment. You must keep in mind that you are not just putting yourself at risk, but you are also putting your business and any partners at risk, as well.

Pros and Cons of Small Business Loans: Steady Growth

Can we talk shop for a moment?

I know you’ve been wondering if it’s time. Is it time to get serious about that home business you keep wanting to try? Is it time to expand that part-time work you actually like more than your “real job” so that maybe it becomes your “real job”? Or is it time to hire actual employees for that store front you’ve been managing by yourself or with your spouse? Maybe add some equipment? Increase your inventory? Expand your services? Are there small business loans out there for situations like mine? How should someone like me even approach business loan shopping?

I’ve wondered some of the same things.

The Unique Challenges of Small Business

It can be frustrating, trying to explain your vision to people who aren’t entrepreneurs. They don’t get it, because in their worlds “playing it safe” is always the answer. And for them, maybe it is. Maybe it always will be.

I’m thankful for those friends and their ability to be content with that. They’re hard workers and great people and we love and value them.pros and cons personal loansThat’s just not me. Maybe you’ve been wondering if it’s just not you, either.

Maybe you’ve been toying with the idea of starting your own business, or taking your current hobby to the next level. Or perhaps you’ve already established yourself as an entrepreneur. You’re working out of your home, or you have your own shop, booth, or stall, and you’ve learned some of the hard truths of business finance. I’ve known successful business owners who spent years working out of their truck and their garage. For you, the question may not be whether or not to take the leap, but whether to make the next one longer and higher than you’ve tried before.

Whatever the exact status of your business, your hobby, your passion, small business owners (or those who wish to be) are at something of a crossroads right now. In many ways, you hear, the economy is active and strong. Small businesses are on the rise. At the same time, working for other people no longer seems to offer the promise it once did over time. Some of you have read this in the financial pages; others have experienced it yourself in far too personal terms.

Leaps and Lurches: The Search for Steady Growth

So what should you do? Is it time to jump, or better to play it safe and see how things unfold in upcoming months and years? Is it possible to take small but significant steps forward without unnecessary risk? How can your business plot a course for evolutionary growth? For expansion instead of explosion?

If you want to grow, or get serious about changing course or starting something entirely new, you’ll need resources. That’s not a problem if you have a wealthy relative ready to finance your efforts out of familial affection or the hope of a small cut of the profits down the road, but for the rest of us that means taking out one or more small business loans. It means risk, and commitment, and making endless decisions – many of which we can’t even anticipate yet. It means consequences – good ones, bad ones, and some which may be both.

I can’t tell you what the right call is for you in your situation right now. I wish I could. I’d make a fortune advising folks just like yourself when to wait, when to leap, and when to step cautiously ahead. Plus, I’d be wildly popular and everyone would come to my parties just to hear me pour my wisdom like champagne, only twice as bubbly.

What I can, do however, is help you revisit some of the pros and cons of small business loans and suggest a few things to consider as you shop business loans. Then, if you decide to move forward, we can help connect you with online lenders ready to compete for your business. What you do after that is entirely up to you; that’s how running your own business works, after all!

Business Loan Basics Spelled Out: Loans 101

Growing Pains

Before exploring the various types of small business loans or the specifics of business loan shop, the most fundamental question is whether or not you really want or need a small business loan. What are some good reasons to shop business loans to begin with?

Physical Expansion

Feeling a bit snug where you currently operate? Finding it difficult to display your products or promote your services? Do your employees have to take turns with the community desk and chair? Perhaps it’s time to move or add some square footage to your existing location.

Branching Out

Maybe the solution isn’t making your location bigger so much as making it the first of several. Is it time to add locations in nearby cities or utilize multiple locations for maximum efficiency? Explore your options, but don’t be afraid of taking this leap if the numbers justify it.

Adding Inventory

If your business involves selling products utilizing a large variety of materials, you know the importance of having the right goods on hand. In this age of next-day delivery and immediate gratification, fewer and fewer customers are willing wait for you to order in their preferred colors or replenish whatever supplies are required to serve their specific needs. Or, if your business is seasonal, you may regularly experience “feast-and-famine” cycles which could make periodic small business loans a practical element of your overall business financing.

Adding Employees

While you don’t want to borrow money to meet payroll on a regular basis, initial expansion of human capital may require some upfront investment. There are interviews to conduct and salaries to guarantee – not to mention you’ll need somewhere to put them once hired (see above).

Updating Equipment

There’s no sense buying something just because it’s shiny and new, but if your business uses special equipment or manufactures products, it makes even less sense to fall behind your competitors. Chances are no matter what sort of business you do, you’re using one or more computers, smart phones, and other technology. Don’t upgrade just for bragging rights, but make sure you have reliable, efficient tech if you want to remain competitive.

Establishing Credit

Maybe everything has gone magically for you since day one; kudos to you if that’s your story. For most of us, however, our journey has included some wrinkles along the way – some “downs” which make the “ups” that much more fulfilling. Our credit report probably reflects this range of experiences (hopefully telling a story of determination and recovery as much as risk and periodic reward). The time may come that your business would benefit immensely from access to substantial credit. Don’t wait until that day to shore up your credit history; small, reasonable small business loans now, paid back in a timely and consistent manner, can lay essential groundwork for those moments.

What To Look For In Small Business Loans

If you’ve decided that now is a good time to grow your business, and that a small business loan is part of that, it’s time to break down the basic elements you should consider as you begin to shop business loans. Sometimes it helps to step back and start from scratch in order to think clearly about the right choices for your business and your circumstances.

How Much Do You Need?

If this sounds like an easy one, you haven’t thought it through enough. Take out too little, and you’ve put yourself in debt without doing what you set out to do. Take out too much, and you risk overextending yourself unnecessarily. At best, you’ll be paying back interest on money you didn’t really need. There’s no perfect answer to this one, but run the numbers several ways and get as close as you can before reaching out to business lenders. Be ready to explain to them how you arrived at your total if asked.

What Kind of Collateral Is Required?

Depending on your credit history, your relationship with the lender, and the purpose of the loan, you may be asked to put up collateral on your small business loans. This would be something of value you’re offering to the lender in case you are for some reason unable to repay your loan as scheduled. Don’t take this part lightly. Your home or business may provide ample collateral and allow you the resources you need to grow. They may even help you secure a better interest rate. But if you’re unable to repay your loan for any reason, you risk losing whatever you’ve put forth as collateral. That’s not how the lender wants it to go down, and I’m certain it’s not what you want, but it happens. Think through the ramifications before you sign.

What Interest Rate Can You Get?

Your interest rate is largely a function of your business and personal credit score history, but there’s no need to be discouraged if you don’t have perfect credit. Different lenders use different factors to determine what they’ll offer you. This is one of the biggest reasons you should look at multiple lenders. Try your local bank or credit union, but it’s the 21st century – try a few reputable online lenders as well. Pay attention to the specifics of each (not just the interest rate) before you decide, but I suspect you’ll be pleasantly surprised by some of the online options that didn’t exist for small business loans a generation ago. You may decide to accept a higher interest rate now to begin rebuilding your credit record so that you can negotiate better terms down the road.

What’s the Length of the Loan?

This is another balancing act. You want to keep your payments manageable, and longer terms certainly help with that. At the same time, a 48-month loan will cost you more than the 24-month version, even if the interest rate is the same – which it probably won’t be. If you need that longer-term option and the lender offers it, great. But if you can reasonably pay back the full amount in three years instead of five, you’ll save substantially on total interest paid. Some longer-term loans are particularly difficult for newer businesses to secure and lenders may require additional documentation or security for the loan (see below).

What’s the Late Payment Policy?

No one plans on paying late, but we should be honest about the possibility over a period of several years. What’s your lender’s policy about late or missed payments? Are there extra fees, or just additional interest? At what point do they consider the loan in default? You should pay back every loan in a timely, professional manner, but you may find substantial variations in how different lenders treat minor inconsistencies. Better to know up front just what these are.

Are There Penalties For Early Payments?

I know – who could possibly object to you paying your loan back early? With most traditional business loans this isn’t a problem, but you should clarify up front whether extra payments automatically go towards the principal of the loan or will simply be counted towards next month’s scheduled payment. If your lender does invoke some sort of penalty for paying early, you’ll want to consider that before you commit. This factor alone might shape who you choose for your small business loans.

Small Business Statistics

Interesting Small Business Statistics:

  • 69 percent of entrepreneurs in the United States start a businesses from home.
  • According to the National Association of Small Business’s 2017 Economic Report, the majority of small businesses surveyed are LLCs (35 percent) followed by S-corporations (33 percent), corporations (19 percent), sole proprietorships (12 percent), and partnerships (2 percent).
  • Out of the 50% of those asked, “What’s the best way to learn more about entrepreneurship?” responded with “Start a company”.

 

In 2018, the most popular small business loan methods were:

  • Personal funds 77 percent
  • Bank loan 34 percent
  • Borrowing from family/friends 16 percent
  • Other funding 11 percent
  • Donations from family/friends 9 percent
  • Online lender 4 percent
  • Angel investor 3 percent
  • Venture capital 3 percent
  • Crowdfunding 2 percent

Short-Term Small Business Loans

These are loans usually scheduled for repayment in a relatively tight time frame – from several months to several years. They’re somewhat comparable to buying a car. It’s still a lot of money, but it’s doable, and in a few years, if you keep up as you should, you’re clear. If you’re trying to build your business credit history, these are where you’ll start. Some lenders require short-term small business loans to be tied to specific purposes – purchasing equipment, expansion, inventory, etc.

Short-term loans tend to be for relatively small amounts, although what that means will vary widely with the type of business you own. While your credit still matters, lenders are more likely to take a chance on small business loans scheduled to pay off over a shorter term. Some forms of these loans dramatically differ from your car payment by being scheduled for repayment in weekly, or even daily, amounts. It all depends on the terms you work out with your lender.

Long-Term Small Business Loans

Most of the time, small business financing for gradual growth will involve relatively short-term loans of manageable amounts. There are circumstances, however, in which you may need to shop business loans for much larger amounts and for longer periods of time. If you’re building new locations or purchasing expensive equipment, the investment required may not be something you can reasonably repay in four or five years. If short-term loans are somewhat like buying a car, long-term business loans are more like buying a house.

I suppose we’d all love to have this sort of problem – so much growth that we have to start business loan shopping just to keep up. Perhaps, then, we should take a moment and consider a few of the realities of longer-term small business loans and what you need to know going in.

Long-term small business loans aren’t usually tied to specific purchases or purposes. They may be taken out to cover a variety of needs while your business establishes itself or grows. Just because the lender may not require proof of specific purchases doesn’t mean you shouldn’t have a good idea where the money is going before you sign up, however. While it’s impossible to predict all factors with certainty, you should have a fairly detailed business budget broken down into a spreadsheet – for your own reference as much as anything.

How will this loan help you move forward? How will it make you more profitable, enabling you to pay back the loan and still come out ahead over time? Just like in our personal lives, even large amounts of money can suddenly disappear quickly if we’re not fully intentional about where each dollar is going.

Features of Long-Term Small Business Loans

Most traditional lending institutions like banks and credit unions are going to have fairly rigid requirements for long-term small business loans. Your credit score will be a larger factor, and most will have minimum amounts you must borrow to qualify for extended financing. While you’re generally expected to arrive with documentation demonstrating your personal credit worthiness and your business’s ability to pay back any loan, the paperwork requirements will be more extensive for a long-term business loan. It’s unusual for traditional lenders to extend long-term loans to new businesses or any small business unable to document several years of substantial profitability and a clear plan for growth in the near future.

Online lenders are more likely to demonstrate flexibility both in terms of minimum amounts required to take out a long-term loan and their willingness to work with newer businesses. It will probably not surprise you to hear that we’re big fans of online business lenders – but we’ll come back to that in a bit.

Interest rates on long-term loans

Interest rates on long-term loans tend to be a bit lower than for shorter-term loans, which is great but not the money-saver you might expect. The extended terms mean you’ll be paying more over the life of the loan than you would with a much shorter-term loan at a higher interest rate, even if the amount borrowed were comparable. That’s not necessarily a bad thing; it makes sense that it costs a bit more to borrow larger amounts or for longer periods. Still, it’s always a good idea to run the total amount you’re likely to repay under whatever terms you’re able to secure. Thankfully, it’s the 21st century and there are free online loan calculators available for you to experiment with zero risk and no one even watching.

As with a house payment, the most traditional repayment schedule for long-term loans involves monthly payments. You may be given the option of fixed-rate interest or adjustable-rate interest. Fixed-rate, as the name implies, means the interest rate established at the birth of the loan remains the same throughout repayment, whatever happens to market rates in the meantime. With an adjustable-rate loan, the interest on your repayment varies with market rates – it might go up or down from month to month, a little or a lot. Given the nature of long-term loans, some lenders are more likely to push this option than they are with shorter term.

Why Look For Business Loans Online?

No one is suggesting that you only consider online options for your small business loans (or any other sort of loans), but part of making responsible business financing choices is being aware of and weighing your options. In fact, I’d suggest starting with local options – the bank down the street, the credit union you belong to through your spouse’s work, etc. Set up an appointment to talk about your business and their loan options. See what they offer you.
Then explore your online options as well. As I said before, this is the 21st century, and while some things about entrepreneurship have remained the same, other realities are evolving because of technology, changing political dynamics, and the evolution of the modern economy. If you haven’t tried online lenders before, let me suggest a few reasons maybe you should.

Flexible Terms

Online lenders aren’t bound by the same traditions or conservative lending culture typical of most banks and even many credit unions. Because they exist primarily as lenders (rather than as institutions geared towards savings or investment management or large safes full of bullion), they very much want to lend you funding – small business loans, personal loans, auto loans, mortgage loans, etc. It’s literally what they do. Some will allow longer terms on smaller loan amounts, or creative payback schedules based on the specifics of your business. Others will work with you on revolving credit or new equipment loans so that the terms of the loan accommodate your unique business realities. Online lenders have the freedom to be more creative when it comes to specific terms because lending isn’t peripheral to their primary function; it is their primary function.

Reasonable Risk.

You’re in business (or trying to be), so you understand how business works. Online lenders only make money when they loan money and that money eventually gets paid back with reasonable interest. While your credit report and other indications of your ability to repay certainly matter, online lenders have different thresholds for determining acceptable risk. In other words, they’re more likely to “take a chance” on a determined young entrepreneur or a hard-working small businessman trying to move her company to the next level.

Convenience

Let’s be honest – no matter where they’re located or how comfy the chairs, driving from institution to institution, signing in on that little e-pad at the door, then waiting to talk to a guy in a suit who seems to be typing in way more information than you’re actually sharing, is seriously time-consuming when you’re trying to also run a small business and have a life at the same time. Working with online lenders allows you to do everything from the comfort of your office or home and access multiple options all in one sitting. While specifics vary, online lenders often require less paper documentation, so while you’ll absolutely want to have all the same information prepared, there’s less time devoted to photocopying or filing hard copies in manila folders (and zero stamping on things with big rubber ink stampers).

Final thoughts

That’s where we come in. At Loanry, we gather some basic information from you, then connect you with one or more online lenders we believe to be a good match for your needs. There are no fees, no surprises, no point in the process we suddenly pressure you to buy something or upgrade to our “pro” version (it’s all the “pro” version and the “pro” version is free). Connecting lenders and borrowers is what we do – and, at the risk of sounding rather proud of our track record, we do a pretty good job of it.

Let us know when you’re ready, or if you have any questions. We’re always here.