The 11 Best Small Business Loans to Help You Grow

 

Starting and running a business is tough, especially when you do not have the cash you need to make moves. This article is going to guide you through the types of small business loans you can apply for as well as 11 of the top loans and lenders you can consider.

11 of the Best Small Business Loans and Lenders

It is always important to compare small business cash loans to make the best choice. There are plenty of small business loans and lenders out available, but here are 11 of the best options for you to consider in your small business loan shopping:

#1 OnDeck

Good For: Those who need cash fast and often, and those who have trouble being approved for small business loans elsewhere.

OnDeck is a pretty popular option that is known for both term loans and lines of credit. The term loans are available in amounts from $5,000 to $500,000. You can pay them off in three to 36 months, depending on the amount you borrow. Interest rates for term loans start as low as 11.89 percent, though your rate will depend on credit scores or credit history.

You can also apply for a line of credit from $6,000 to $100,000 that you can repay in 12 months. Interest rates for lines of credit start as low as 10.09 percent.

OnDeck is also an approved lender for PPP loans through the SBA. PPP loans are federal loans that are intended to help cover the cost of payroll and certain other things. These tend to be low-interest loans, and you can borrow up to two and a half months worth of payroll.

That time frame gives you the chance to get on your feet or make the decisions necessary to cut your payroll costs.

Loan Amounts: $5,000 up to $500,000
Interest Rates: 1% for some, others 10.09% and up
Repayment Terms: 3 – 36 months

OnDeck requires that you be in business for at least one year. This is because they factor in your business’s performance as well as your credit for approval. That can be helpful as a profitable business has the chance to get approved even if the owner’s credit score is low or the business does not have a good credit history.

On the other hand, it can be risky. Part of the reason they take your performance into account is that they are using your business for collateral. If you are late or fail to make payments, you might lose your business.

Repeat customers get incentives, such as lower interest rates
Factors in the business’s performance instead of just credit

Requirements are often too stringent for new businesses
Those with good credit scores or history will probably find better rates elsewhere
Origination fees up to 4 percent
Your business is collateral

Bottom line: OnDeck can be incredibly helpful for those who cannot get approved through other lenders. However, if you choose to apply through them, be sure you have a backup plan in place so you do not lose your business. Think it through before making moves.

#2 Kabbage

Good For: Small business loans for those with not so great credit and those looking for convenience.

One of the best things about Kabbage is that there is no credit check. Instead, you link your bank account and basically they approve or reject you according to the money you have coming in- and you need at least $50,000. This is great for those whose credit just cannot score them a loan elsewhere but makes a decent income. However, it also means higher interest than many other lenders.

Loan Amounts: Up to $250,000
Interest Rates: 1.5% up to 10%

Kabbage does not have many loan products. In fact, it usually only offers lines of credit. At times, they will open up other loan products, but not always. While lines of credit can be convenient, the interest rates often fluctuate and there are usually maintenance fees.

Fortunately, they offer several ways to access your line of credit. You can choose a physical card, which they will send through the mail, but you have to wait until the card arrives to use it. Or you can also use a bank account or a PayPal account. You are expected to repay what you borrow in either six months or 12 months, depending on how much you borrow.

Easy application
No credit check
Generally quick approvals
Several ways to receive cash

Only lines of credit
High interest
Have to be in business at least a year and earn $50,000 annually

Bottom line: Kabbage is great for those who need money pretty quick without a credit check, but be prepared to repay the loan within a year tops.

#3 Wells Fargo

Good For: Those with good credit who want a well-known lender.

Wells Fargo has been in business since 1852, making them a well-established and well-known lender. They offer several types of small business loans including term loans, lines of credit, and more. The lines of credit start as low as $5,000 and go up to $100,000. The rates are as low as 1.75 percent.

Loan Amounts: $5,000 to $100,000
Interest Rates: As low as 1.75% up to 22.99%

The unsecured small business loans start as low as $10,000 and can go up to $100,000 with interest as low as 8 percent and go as high 22.99 percent. There is usually a $150 opening fee, but it is sometimes waived. Repayment terms can go from one to five years. They even offer SBA backed loans.

Unsecured loans, lines of credit, SBA loans, and more
Repayment terms up to five years
Loans up to $100,000
Well-established lender

Annual and opening fees for some
Must have good credit
Need annual sales of between $2 million and $5 million

Bottom Line: If you have good credit and your business does between $2 million and $5 million in annual sales, Wells Fargo can be a really good option for you as they can loan high amounts with low interest. Those with bad or fair credit should look for other small business loans.

#4 SBA Small Business Loans

Good For: Those who cannot get an approval through other lenders.

The SBA, or Small Business Administration, was founded to support the small businesses in our country. There are many small business owners who simply cannot get funding through traditional avenues due to credit or other lender requirements. This is where the SBA comes in. It is not a lender itself but rather guarantees business loans making lenders more apt to approve you.

Loan Amounts: $500 to $5.5 million
Interest Rates: As low as 2%

In order to qualify for SBA small business loans, you must meet some requirements, such as your business must be operated in the U.S., it must be a for-profit business (non-profits have other funding avenues), time and/or money must already be invested in the company by the owner, and the owner must not be able to qualify for alternative loans.

Backed by the SBA
Several loan types
Competitive rates and repayment terms

Approval typically takes longer than with other lenders
Some loans require personal collateral

Bottom line: The SBA works with business owners to get loans with competitive rates and repayment terms- all the way up to 25 years depending on the loan. It is a great option for businesses that simply need a hand but cannot get it elsewhere.

#5 Lending Club

Good For: Businesses that are somewhat established but not completely.

Lending Club is a peer to peer lending service that provides term loans of up to $300,000. The requirements are pretty fair in comparison with other lenders. You must have been in business for at least a year and make at least $50,000 in annual sales to qualify. You must also own at least 20 percent and have decent credit.

Loan Amounts: $5,000 to $300,000
Interest Rates: 5.99% to 29.9%

Lending Club is a peer to peer lending service that provides term loans of up to $300,000. The requirements are pretty fair in comparison with other lenders. You must have been in business for at least a year and make at least $50,000 in annual sales to qualify. You must also own at least 20 percent and have decent credit.

The biggest downside is that there have been accusations of hidden fees and double payments. This is being disputed and it still has a decent rating on the BBB’s website. Still, it is something to keep in mind. Also, loans of more than $100,000 usually require a lien on your business for collateral, which can always be a bit risky.

Great interest rates for many
Requirements are not too stringent
Wide range of amounts to borrow
Repayment terms up to 5 years

Only offers term loans
Origination fees of 1.99 – 8.99%

Bottom line: Lending Club seems like a great option for many, but- as always- go into it with your eyes wide open so you are not blindsided later.

#6 BlueVine

Good For: Businesses with inconsistent cash flow and startups.

BlueVine is an online lending service that aims to help businesses that have issues with cash flow. It is one of the lending services that offer small business loans with what is known as invoice financing. If you have unpaid invoices, you can sell them to BlueVine- you get a lump sum and BlueVine collects the payments from your customer.

Loan Amounts: $5,000 to $5 million
Interest Rates: As low as 4.8%

This type of lending through BlueVine requires that your business have $10,000 or more in monthly revenue, have been in business for at least three months, and that you have a credit score of at least 530.

BlueVine also offers term loans and lines of credit. The requirements for these are a little more stringent but not as stringent as other loans and lenders. BlueVine opens doors for many that are not normally able to qualify for small business loans through alternative avenues.

Offer invoice factoring, lines of credit, and term loans
No origination fees or maintenance fees
Low credit scores

All loans not available in all states
Some high interest rates
Short repayment terms

Bottom line: BlueVine is definitely worth considering for new businesses that need cash. However, watch out for high interest rates if you have a low credit score. Also, make sure you can repay loans quickly- sometimes in as little as six months.

#7 Fundbox

Good For: Those with little or no time in business.

Fundbox is an interesting lender. It does not have many requirements at all. Small businesses and even freelancers are welcome to apply. There is no minimum amount of time you have to be in business and you can have a credit score as low as 500. Also, there are a few different loan types Fundbox offers that go all the way up to $100,000 and have repayment terms up to two years.

Loan Amounts: $1,000 up to $100,000
Interest Rates: As low as 4.66%

There are really only two specific requirements. Fundbox goes by bank activity and income. Therefore, all you need to do is meet the requirement that you are using a compatible bank that they can look into for at least three months. For other credit, you must have been using certain types of accounting or invoicing programs for at least two months. The bank and the programs are what Fundbox uses to evaluate your business, depending on the type of loan you get from them.

Accept scores as low as 500
Invoice financing and other loans
Low requirements

Potentially high interest
Must use accounting software and a compatible bank

Bottom line: Fundbox is one of the most relaxed lenders you can find at this time as far as requirements go. As with most credit, though, lower credit scores will lead to higher interest rates.

#8 Crest Capital

Good For: Businesses wanting to purchase instead of rent equipment.

Crest Capital offers small business loans that focus on financing equipment for those who hope to purchase instead of rent. It offers several ways to purchase this equipment, with loans going up to $1 million. Repayment terms extend all the way to 84 months depending on the loan.

On the downside, Crest Capital requires more than many of the other options we have mentioned here. For one thing, they want a credit score of at least 700. They also want you to have been in business for at least two years among other things.

Loan Amounts: Up to $1 million
Interest Rates: As low as 5%

Up to $1 million
Potential approval in as little as 4 hours
Several loan options and lease terms- up to 84 months

A minimum credit score of 700 required
Have to be in business at least 2 years
Pretty stringent qualifications

Bottom line: If you want to purchase your equipment, have really good credit, and your business is pretty established, Crest Capital might be your best option. If you do not meet these requirements, apply elsewhere.

#9 Accion

Good For: Startups and small business without much history

Accion is a nonprofit company that started as an organization that supplied microloans and financial education to low-income communities. Over time, they began offering more products and bigger loans but are still dedicated to helping businesses in need.

Accion does a case by case approval basis, so they have very little set qualifications listed. They usually only ask for credit scores of 575 and has no specific requirements in terms of how long you need to have been in business.

Loan Amounts: $300 to $250,000, sometimes up to $1 million
Interest Rates: 7% up to 34%

Relaxed requirements
Nonprofit that educates borrowers

Possibly high interest
May charge extra fees

Bottom line: Accion is a good choice for any startup or small business, but especially those that do not meet the stringent requirements of other lenders.

#10 Rapid Finance

Good For: Businesses that need quick cash.

Rapid Finance offers cash advances as opposed to outright loans and repayment terms up to 60 months. The requirements to qualify are pretty attainable. You only need a credit score of 500 and you need to have been in business for at least 12 months. They do not have a specific amount of revenue they require to apply as it goes by the amount you need to borrow.

$5,000 to $1 million in some cases
Interest Rates: 9% to 31%

Rapid Finance lives up to the name by generally offering an answer within 24 hours and quick disbursement of the money. You will likely end up paying high monthly payments and have to use your business as collateral.

Quick approval and loan disbursement
Great rating
As little as 12 months in business but no set revenue requirements
Credit scores of 500 accepted

Requires a lien on your business as collateral Monthly payments can be high

Bottom line: Rapid Finance offers cash advances to those who need quick cash and meet few requirements. However, these advances can be costly and risky. If you are unsure of whether you can repay the cash advance or not, look for alternative loans that come with less risk and lower payments.

#11 SBG Funding

Good For: Startups and other small businesses.

SBG Funding is great for newer businesses that cannot attain other financing due to their age. They have loans all the way up to $5,000,000 and offer repayment terms of up to five years. They even accept credit scores as low as 500 and only require that your business be at least six months old.

Unfortunately, they do require you to make at least $150,000 in annual revenue, which may be an issue for some startups. Fees and any additional requirements are typically not disclosed until you are in the application process. Additionally, you may end up paying weekly instead of monthly payments.

Loan Amounts: $5,000 to $5,000,000
Interest Rates: 5% to 35%

Credit scores as low as 500
Only requires 6 months in business

May require weekly payments
Need $150,000 in annual revenue

Bottom line: SBG Funding does give many newer businesses a chance at financing, but not all. While some requirements are very relaxed, others are not.

Conclusion

For many people- especially freelancers, entrepreneurs, and startup companies- getting the financing necessary to grow a business can seem like an insurmountable task. Fortunately, that does not have to be the case. There are small business loans out there for almost everyone and every business. With planning, research, and some time, you should be able to find a loan to suit your needs and your situation.

The 9 Best Online Small Business Loan Lenders

Close up portrait a pile of money on computer keyboard.

Business owners on the market for small business term loans have many options to choose from. You can choose from among various online small business loan lenders. If you’re on the market for a business loan, you need to familiarize yourself with the different lenders out there. Then, you need to determine which lender offers the loan that best suits your needs.

Maybe your small business has started growing really fast and you need a capital injection. But before you decide which online small business loan lenders to work with, you should learn about small business loans. It’s important to understand how these loans work. It’s also important to know how to identify a good business loan product.

Now is the time to get started exploring online small business loan lenders.  If a business opportunity is presenting itself to you, go for it! Get the funds you need with the right loan product.

Business Loan Lenders to Look Into

Pursuing loans via online lenders is very convenient. However, there are so many out there. You should know the details about all the most prominent online small business loan lenders.

When you’re looking for the right lender to work with, you might not know who to choose. Fortunately, the Internet provides some vital information about business loan terms, interest rates, and other loan information. When you’re researching lenders, look into the interest rate range. You can also look at the credit rating necessary for approval. Some online lenders also post income requirements or minimum time in business to qualify. You need to track down lenders that post qualifications your company meets.

The following are nine online small business loan lenders to consider. Read through the following information and determine which of the following lenders are best for your company.

Kabbage

Kabbage online lender logoKabbage is a lender offering companies convenient access to business funding. This lender offers one of the fastest ways to acquire funding out there. Those who borrow through Kabbage can qualify for lines of credit. Lines of credit offer convenient financing. Borrowers can use funds whenever they have a need. They don’t have to spend all the loan money upfront.

Businesses who apply for a loan with Kabbage don’t have to submit tax returns or credit scores. The application is simple. In fact, those who apply to receive a response in minutes. If you’re a business owner with no time to waste, Kabbage might be the right lender for you.

Some of the advantages with Kabbage include an automated approval and no minimum credit score. Another advantage is that funding is sent out via a bank account, Paypal, or an actual card that can be charged. However, there are a few drawbacks. Kabbage is known for having relatively high-interest rates. Also, the lender is known for having a fee system that can be confusing.

OnDeck

Ondeck online lender logoThis is another popular online lender for business loans. OnDeck is popular for those who want to borrow numerous loans into the future. This online lender offers better terms to repeat borrowers. This online lender offers both term loans and lines of credit. The term loans can be anywhere up to $500,000. Interest rates on term loans start at 9.99 percent. Lines of credit are available totaling as much as $100,000. The interest rates on these lines of credit start at 13.99 percent.

The application process is fast with OnDeck. Applicants receive a response within minutes. They can either apply online or call in their application. Funds are sent out within a day in many cases.

OnDeck is known for offering good customer service. Those who are interested in a loan can discuss their needs with a financial advisor. This is a great way to get valuable advice on business finances. The company is known for having a Better Business Bureau rating of A+. Also, the lender has loaned out $13 billion to companies all over the world.

Funding Circle

Funding logo online lender logoFunding Circle is another popular small business lender. This lender is especially good for businesses looking for peer-to-peer lending. This means that Funding Circle hooks borrowers up with investors. Despite this difference, the application process with Funding Circle is much like that of traditional lenders.

The advantages of borrowing with Funding Circle include low costs upfront and minimal starting rates. Also, Funding Circle is known for exceptional customer service. However, the application requirements are a little strict for some borrowers. Companies need to be in business for at least two years. It’s also worth noting that Funding Circle only offers secured loans.

Currency

Currency FinanceCurrency is a business lender that focuses specifically on equipment financing. This is the only type of expense Currency loans can be used on. The interest rates on these loans start at 6 percent and go up to 24 percent. Those who qualify must have at least a 585 credit score. The rates provided by Currency are highly competitive in comparison to other online lenders.

A possible drawback of Currency loans is the prepayment penalty. Those who decide to pay their loan off early might have to cover this expense. Another drawback is that those who borrow through Currency must have a lien on their business. They also must provide a personal guarantee. Business owners need to be in business for at least six months to be approved. They also need to bring in at least $75,000 per year. Another requirement is that a company’s net loss can’t exceed 10 percent over the previous year.

Credibility Capital

Credibility-CapitalCredibility Capital offers quality business loan products. However, not all companies will qualify. Business owners need a relatively high credit score to qualify. The minimum credit score required is 680. Also, businesses need to have been in existence for two years. However, those who can qualify enjoy low-interest rates on these loans. The APR range on Credibility Capital loans is between 10 percent and 25 percent.

Those who take out these loans don’t need to pay any prepayment penalty. They can make extra payments to bring down their total interest costs. There are a few more requirements those interested in borrowing should know about. Companies need to bring in at least $250,000 every year in revenue. Also, they cannot have had any bankruptcies on their record over the previous five years.

BlueVine

Bluevine online lender logoThe lender BlueVine offers working capital. These loans meet short-term financing needs. Those who apply only need to have a credits core of 600 to potentially qualify. The interest rates on these loans are a little on the high side. Interest rates range between 15 percent and 78 percent.

One huge advantage with BlueVine is that companies who haven’t been in business for a year can still qualify. Also, funds from BlueVine are dispersed quickly. Funds are sent to the borrower’s account in as little as 12 hours. One drawback of BlueVine loans is that they are not available everywhere. These loans are not available in the states Vermont, South Dakota, and North Dakota.

Fundbox

Fund BoxFundbox is another lender that provides credit lines to business owners. One unique and advantageous feature here is not having to fill out application details. Instead, Fundbox uses an automated algorithm to make approval decisions based on a company’s bank account. The automated application is very convenient for business owners. Also, Fundbox’s requirements for approval are not particularly strict. Funds are dispersed quickly to those who are approved. One disadvantage is that the APRs on these loans are a little high. Also, loan amounts are relatively small for Fundbox loans. However, these loans are highly accessible.

Lendr

lendrLendr is an example of online small business loan lenders offering a fast application procedure. If you have better credit or can finance your business by other means then you should. On the other hand, if you have bad credit,  This lender can be a good option. They have very good customer service, which is always a plus. Lendr takes a different kind of approach with retailer doing only merchant cash advances. During your small business loan shopping, you should definitely look into Lendr offerings if this type of less than prime credit and you’re run a merchant type business.

There are a few possible downsides to doing business with Lendr. Rates and fees can sometimes be quite high on these advanced.

Kiva

Kiva online lender logoKiva is an online provider of microloans. These microloans are typically for amounts of $10,000 or less. While many business owners might need to borrow more than this, these small amounts could be ideal for others. Kiva is a unique lender that uses crowdfunding to help come up with funds.

With crowdfunding, the business owner will seek out financial assistance from family members and friends. This makes it so that it takes some time for many borrowers to get the funds they want. Yet the interest rate with Kiva can be as low as 0 percent. This is a huge advantage for many companies that don’t want to pay expensive interest charges.

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Understanding How Small Business Loans Work

Familiarize yourself with what online small business loan lenders are and how loans work before you get started. A small business loan is very much like a personal loan. However, you borrow the loan in the name of your business. Hopefully, your business has built up a strong credit history. This makes borrowing a small business loan easier.

Small business loans have similar repayment arrangements for personal loans. The borrower makes regular payments on the loan until it’s paid off. Also, the lender charges interest on the loan. The amount of interest the borrower pays depends on credit history.

Of course, there are some significant differences between online small business loan lenders and personal loan lenders. There are major differences regarding the key documents for applying. The lender is going to be analyzing your business’s condition and financial health. Therefore, you may need to furnish documents like income statements and financial projections. You might also need to provide your business tax return when you apply.

Another difference is that business loans could require you to submit a business plan to the lender. Business loans are more complex than personal loans. They’re usually geared toward a particular project or business venture. The lender may analyze the borrower’s business plan when making the approval decision.

The Process for Applying

Applying for a loan with online small business loan lenders is a lot like applying for a personal loan. The borrower must fill out an application. This application could ask for a variety of details. These could include the revenue the company generates and the history of the company. The application will also ask for details about the business owner.

Online small business loan lenders often make it possible to apply completely online. This is highly convenient for business owners looking to borrow. Online applications can be filled out and submitted quickly. Applicants also often enjoy a quick response to their applications.

Factors Influencing Your Approval

Online small business loan lenders look at many factors when making approval decisions for your business loan. Lenders want to lend to businesses that are well established. They want to lend to companies that are reliably making profits. They also want to lend to business owners with a good plan. The credit history of the company applying for a loan is an important factor. The personal credit histories of the business owners are also sometimes evaluated. This is especially common for younger companies without established credit.

Characteristics of Good Business Loan Lenders

You need to know what to look for when evaluating online small business loan lenders. The more research you do, the better the lenders you will find. You need to put effort into understanding the characteristics of a good business loan.

The following are three important characteristics of good online small business loan lenders.

Low-interest Rate

The interest rates that a lender offers is a primary consideration. The higher the interest rate, the more expensive the loan is. Business loan interest rates vary widely. Rates could vary from around 5 percent to 35 percent. In some cases, interest rates could be significantly higher than 35 percent.

Before applying with a lender, you should know the interest rates they typically offer. Also, learn the interest rates typically offered for a business with your credit and income situation. You don’t want to apply with a lender if you know they don’t offer competitive interest rates.

Flexible Repayment Plans

Another valuable characteristic of a business loan lender is flexibility in repayment. A good lender will let you work out repayment terms that fit your budget well. Look into the repayment issue of a lender before applying. It’s best to call the lender and discuss repayment with a representative. Ask what types of options they offer.

One key issue is the loan terms offered by particular lenders. The loan term indicates how quickly you’ll need to repay the loan. A longer loan term could mean a lower monthly payment. However, it could also mean more interest costs. When planning for your business loan, put thought into the loan term you prefer.

Customer Service

Customer service is a big concern. You want to work with a lender that will offer good customer service. This way, you’ll be able to call in and ask questions. This gives borrowers greater peace of mind as they borrow. It also makes the whole borrowing process more convenient.

Any loan you take out for your business will have a big impact on your company’s finances. You need to be careful what kind of financial agreement you get in. You want to borrow in a way that is likely to improve your company’s profitability. Being able to call the lender with questions is important.

Poor customer service from a lender is a bad sign. If customer service is poor, it could mean that the lender is not devoted to customer needs. The best way to determine customer service quality is to read reviews from previous borrowers. Reviews could tell you if it’s difficult to get in touch with customer service personnel. They can also tell you if the quality of customer service personnel is poor. Customer service staff can’t do much for you if they never have the answers to your questions.

In Conclusion

At some point, borrowing is the perfect solution for many businesses. Without financing, you might have to wait indefinitely to grow as a company. That is why it is important to determine if the small business loan is right for your business. When you borrow, you can speed the process up. Regardless of your credit situation or business history, there is probably a small business loan out there somewhere that you can qualify for. Research the lenders mentioned above and determine which one is best for the unique needs of your company.

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Business Line of Credit That Helps Toe the Expense Line

A business line of credit is a small business loan that gives the flexibility that a regular business loan doesn’t. With this type of loan, you can borrow up to a certain amount and then pay interest on the portion of money you borrow. You draw and repay the funds as you need, as long as you aren’t exceeding your credit limit. This works similarly to a credit card.

There are three main types of business lines of credit. You can choose unsecured, secured, or an equity line of credit. The main difference is whether or not there is collateral. You can use equity line of credit for businesses that have equity in residential or commercial real estate. The equity in the business or home is used as collateral for the line of credit. Business lines of credit can be inexpensive to maintain, especially when you consider other forms of financing. Keeping one open costs virtually nothing and you are only responsible for paying the interest on the amount that you use each month.

How a Business Line of Credit Works

Business lines of credit differ from a regular business loan since you don’t get a one-time lump payment. With a line of credit, you keep using and repaying the money as long as you like. You do need to make your payments on time and you can’t exceed the credit limit. Many lenders will allow you to repay the full balance early to help you save on credit costs. A business line of credit ranges from $1,000 to $150,000, which is usually smaller than a term loan. A line of credit with a lower limit is usually not secured, which means that you don’t need to put up collateral, such as inventory or real estate.

Qualifying for a Business Line of Credit

There best way to figure out if your business qualifies for a line of credit is to apply. Don’t apply to too many lenders in case you don’t qualify. This is because you don’t want to be rejected and have it hurt your credit multiple times. Many traditional lenders, such as a bank, will require you to have strong revenue and a few years of history in order to get a line of credit. A larger line of credit may require some collateral, which can be taken by the lender if you fail to make your payments. In order to apply for a business line of credit, you will be required to have some documentation, such as bank account information, financial statements that include a balance sheet and profit and loss statement, and personal and business tax returns.

If you choose to go with an online lender, you may find that these lenders have looser qualification standards than banks. However, these lenders may have lower credit limits and could charge higher rates than a bank. You will need to have been in business for at least six months and have a certain amount in annual revenue in order to get a business line of credit. Some lenders don’t have a minimum credit score but usually, you would need to have a score of 500 or higher in order to qualify.

Where to Get a Business Line of Credit?

There are a number of financial institutions that give you a line of credit. With a business loan shop local. Local banks and credit unions can be great options. These financial opportunities actually exist to serve the community and may be more flexible with your credit application than big banks. You may have more success.

There are also plenty of alternative lenders online. Since the qualification process uses an algorithm, with an online lender the approval process is quick. However, keep in mind that there may be some downsides to a quick approval process. Since it doesn’t have the same level of due diligence the lenders build the risk into the cost of the loan so the interest can be on the higher side. However, you may be able to accept the rate for access to instant necessary funds. You can also get business lines of credit from the Small Business Administration. These lines are usually for specific purposes, such as contract needs or seasonal expenses.

Benefits of Getting an Unsecured Business Line of Credit

There are a number of benefits of an unsecured business line of credit, making this a popular choice for every business.

Quick Access to Money

Lines of credit allow a business owner to use whatever amount of credit they would like when they would like. Any company may face a financial situation they didn’t expect and need cash quickly. A business line of credit can give you cash at these unexpected times when you need it quickly.

Easy Money Transfer

With an unsecured line of credit, you can transfer cash for business expenses in different ways. You can do this over the phone, through a check written, or online.

Helps Even Out Cash Flow during the Slow Season

For many businesses, a line of credit can be the perfect tool for balancing cash flow through slower seasons. This may be applicable for some businesses more than others and it will depend on your business. For example, a retail store that will make most of their sales during the holiday rush can be short on cash during the rest of the year, which makes it hard to make payroll. You aren’t able to use a credit card to pay for employees but a business line of credit can be helpful in this situation.

Improves Business Adaptability

There are times when you have a limited window in order to take advantage of opportunities. For example, if you are a manufacturer and your supply costs are reduced, you want to take advantage of this but may not have the cash on hand to do so. With a business line of credit, you won’t miss out on opportunities that will allow you to save money in the long run.

Generous Credit Limits

When a small business owner needs to make a larger purchase, he or she can usually do so with a business credit line that has a high limit.

Flexible Payments

Business loans typically require fixed monthly payments but unsecured lines of credit come with some more flexible payment options. Each borrower can choose to pay the minimum monthly payment, more than the monthly payment, or the full amount that they owe. This gives businesses a chance to repay the debt on a schedule that works for their financial situation.

Separation of Business and Personal

Since a business line of credit is issued to a company and not the individual business owner, the company begins to build its own credit history separate from the owner.

Develop a Good Credit History

When you make payments on time with a business line of credit, it can help your business build a strong credit score. This can allow you to apply for bank lines of credit in the future and could help with better terms for any future loans.

The Cons of A Business Line of Credit

The main drawback is that owners need to have discipline when it comes to tapping into the credit line. Debt can build up very quickly if owners are only making the minimum payment each month when there isn’t a fixed monthly payment. Interest can grow and become substantial and it leaves the business in a hard financial situation. There are also some other drawbacks.

Extra Fees and Charges: The business line of credit’s pay-as-you-go format may seem easy but the extra fees and charges can add up quickly if you aren’t careful. The additional costs do vary by lender so be sure to research this when choosing. You shouldn’t be drawn in by a low interest rate and then get slapped with other fees. Be sure to compare annual fees and other costs to find the right line of credit that suits your business or another financing product that could be more affordable for you.

Hard to Qualify: In order to apply for a business line of credit, you do need to provide a lot of documents. You may also need to have a yearly review to maintain your credit line. While some of the information is standard for any type of loan, it may be easier to get other types of financing with fewer requirements and a shorter application process.

Low Borrowing Limits: When compared to some other financing options, credit lines can sometimes come with lower borrowing amounts. If you need money for new equipment, an expansion project, or another expensive project, other financing options may suit you better.

Using a Business Line of Credit

Once you have a business line of credit it’s helpful to use the funds wisely. There are plenty of smart applications for a business line of credit. Examples include paying out seasonal bills, meeting payroll, buying products at a discount, and purchasing equipment. Business expansion is one of the most common reasons why a business owner would want to seek sources of capital.

Before you tap into your line of credit, it’s best to run the numbers first. Are you going to sell the items before you have to pay the debt back? If not, it could get you in trouble The only time you should be using funds from your line of credit is when you are confident you are able to handle the payments and then keep your debt at zero. With this long-term approach to your short-term capital, it sets the stage for positive opportunities in the future. When you make payments on time, you are also building your business’ credit rating and this helps you in the future.

Difference Between Business Line of Credit and Credit Cards

There are many similarities between a credit card and a business line of credit. The credit card company or lender will set the maximum amount you can borrow at a given time and you have the flexibility to use the money as you need.

Pros

Line of Credit: With a line of credit, you have a higher credit limit and access to money on demand.

Credit Card: With a credit card, you are able to have rewards programs and fraud protection and it’s more convenient to use.

Cons

Line of Credit: There needs to be a personal guarantee, there could be a possible misuse of funds, and there are strict eligibility requirements.

Credit Card: With a credit card, the risks include overspending, high interest rates, credit damage for missed or late payments, and not all vendors will accept credit cards.

Both a credit card and line of credit can be short-term financial options for business owners. It’s necessary for businesses to have access to cash in order to pay payroll, invoices, and day-to-day expenses, as well as for emergency situations. It can be easy to fall into debt with both options.

A business line of credit also has some similarities with term loans but there are some differences. With a loan, you are borrowing all the money at once and the repayment terms are usually five, 10, or 20 years. A loan will be the preferred product for things you want to finance over a long period of time.

Is a Business Line of Credit Right for You?

If your company has decent credit and has been in business a while then it’s possible to get a business line of credit at an affordable rate. There are a number of reasons a business line of credit can be a good idea.

1. A business line of credit can be useful for your business to access cash to take advantage of opportunities or cover unexpected business expenses.

2. Opening a business line of credit in advance of when you need it can help you prepare your business for the future, even if you don’t need access to any capital right now.

3. A business line of credit can help you get better business credit, especially if the lender is reporting the information to the business credit bureaus.

A business line of credit may not be helpful to you if you haven’t been in business long. If you don’t have an established credit history, a business line of credit may not be the right option for you. Not every business will meet the eligibility requirements.

Mistakes You Could Make When Applying for a Business Line of Credit

When small business loan shopping, you want to make sure you are avoiding these common mistakes. Before you apply, it’s important to consider your business’ financial health, understand your options, and know your rates.

Not Having a Clear Idea of Why You Need Funds

You should always have a clear idea for what you need the funds for, whether it’s a line of credit or other types of business financing. If you obtain financing without a long-term strategy, you could have trouble getting financing in the future.

Rushing through the Application

As a business owner, it’s expected that you will be busy and work long hours. If you are in a desperate situation and need cash quickly, you can be tempted to rush through the application as fast as possible. This can hurt your chances of getting financing. Simple errors can cause problems, such as an incorrect business address or typo in your employer identification number.

You should set aside some time to really focus on the application and make sure everything is correct so there are no delays in your financing. Be sure to put your contact information and number. There are times when business owners put down the main business line, even though they typically won’t answer calls on that line. Then the lender won’t be able to get a hold of you and you will be left wondering why you haven’t gotten a response yet.

Being Dishonest in the Application

You can be tempted to overstate your financial situation on your application, especially if you need cash. This is a bad idea. Don’t try to fudge the numbers since this can get exposed through the underwriting process. If a lender finds out, it can hurt your chances of getting a line of credit. You don’t want to compromise the integrity of your business.

Misunderstanding Lender Requirements

Don’t apply unless you fully understand the requirements. Make sure you meet the minimum eligibility requirements which are on the website. This will increase your chances of getting approval and prevent any unnecessary credit pulls if you don’t meet stated eligibility requirements.

Final Thoughts

A business line of credit can be a useful financing tool for many reasons and there are a lot of benefits of having one. In order to qualify for a business line of credit, there may be a stringent application process. However, there are different lenders you can seek out that you may be better qualified for in the end. You can use a business line of credit different ways but it helps to have a strategy for paying it off so that you aren’t creating more debt for yourself and getting your business into financial trouble. When applying for lines of credit, make sure you don’t make any common mistakes. So you have a better chance of getting your application approved.

PS: Line of credit can be a good option for you. But you should consider other options as well.

Your Guide to Understanding Traditional Term Business Loans

Sometimes the only way to help your small business grow is to invest in it. You may have outgrown your space and need to find a new facility. You may need to purchase additional equipment to move the business forward. Or you just might need a cash infusion to fund all the items on your “to do” list. You take a look at the bottom line and you see that the cash flow just isn’t there to keep up with your wishes and your dreams. But there are financing options for small business owners out there. They include the traditional term business loan that might be just the financial assistance you need.

What is a Traditional Term Business Loan?

A traditional term business loan is probably what you think of when you think of businesses borrowing money. A lender provides a set amount of money and the borrower pays it back over time with interest and other fees. The term of the loan could be anything from one to 25 years. Interest rates on term business loans can be either fixed or variable. The approval process for a traditional term business loan can be rigorous and may require some collateral. This type of loan will have a maturity date but there is generally not any penalty for paying it off early.

The advantages of a traditional term business loan include flexible terms, a monthly repayment schedule and the ability to fund long-term projects. Financial advisors believe that term loans are best for established small businesses with a proven track record and a good credit history. Term loans are best for funding things like construction, major capital improvements, to provide working capital or to purchase another existing business.

Traditional term business loans work just like consumer loans for houses or cars. You borrow a fixed amount of money and pay it off according to a schedule. The terms and the interest rate of these loans are tied to your credit score.

The term of any loan is the amount of time between when you borrowed the money and when you will pay it back. The terms of the loan spell out if you will pay it off in the short, intermediate or long-term.

Three types of traditional term business loans and what they are used for

What is a Short-Term Business Loan?

Short-term business loans are often a financial solution for small businesses without a credit history. Often these loans have to be paid off within a year but the terms could be as long as 18 months. Because of their shorter duration, short-term business loans aren’t as risky for the lender which makes it easier for businesses to qualify. The approval process can also be quicker, too. But lenders often charge higher interest rates and large loan origination fees for short-term loans. And since the payments are spread out over a short amount of time they can often be fairly large for the borrower.

Sometimes business owners use short-term loans to get over a financial roadblock. The business owner might need to get past a cash flow interruption. Maybe new inventory has to be purchased or the business is in the midst of a seasonal slump. The borrower enters into a short-term loan with the confidence that the business will generate enough money to cover the payments for the brief life of the loan.

Taking out a short-term business loan and repaying it on time is also a way for a small business to prove that it is credit-worthy.

“You borrow when you don’t need money to give you operating capital,” says Carl Gould, an entrepreneur who owns 7 Stage Advisors consulting firm. “It will help you build business credit and good relationships with banks who will think of you as a good credit risk.”

What is an Intermediate-Term Business Loan?

Intermediate-term business loans are generally written with a repayment schedule of one to three years. The payments are usually due each month. Intermediate-term loans are the most common loans given to businesses. Business owners use intermediate-term loans to refinance debt, open a new location, hire new employees or purchase new equipment. Often that equipment will only last as long as the loan is in effect. The business assets are used as collateral for this type of loan.

What is a Long-Term Business Loan?

A long-term business loan is a loan that you pay back in three to 25 years. Five and ten-year terms are the most common.  Payments may be due monthly or quarterly. The company’s assets are used as collateral on the loan. The interest on a long-term loan is generally less than a short-term loan. And since the payments are stretched out over a period of time, long-term loans have lower monthly payments than other loans. The longer loan is less likely to have restrictions on how the money can be spent. Long-term loans are a good source of funding for projects that may stretch out over time. But they come with restrictions on how they can be spent. Often they can’t be used for paying off other debts, issuing dividends or paying director salaries.

What Does It Mean If the Loan has a Balloon Payment?

Sometimes traditional term business loans have a set payment amount that is in effect through the term of the loan. But then at the very end, the payment gets much larger, or “balloons”. It is more common in commercial loans than in personal ones. During the life of the loan, only a portion of the principal is repaid or the payments only cover the interest. Then at the end of the loan the remainder, or the balloon payment, is due. The balloon payment at the end is commonly twice the amount of the rest of the payments. Both short-term and intermediate-term loans can end with balloon payments. These types of loans are best for businesses that are expecting a windfall of cash down the line to cover the balloon expense.

What is an SBA Loan?

The SBA, or U.S. Small Business Association, works with lenders to provide funding for small businesses. The SBA itself doesn’t actually provide small business cash loans, it just works to pair lenders with entrepreneurs. The SBA guarantees these kinds of loans and reduces the risk for the lender.

The application process for an SBA loan is fairly rigorous. But the return is that these loans are offered with very competitive rates and fees. The down payment on the loan might be low and the lender might not require any collateral. Sometimes the SBA also provides small businesses with additional support and resources for growing the business.

SBA loans range from very small to very large amounts of money. Some business owners use these loans to provide working capital to get them through seasonal requirements or to help them refinance business debt. Other small business owners use SBA loans to purchase fixed assets like furniture, equipment or real estate.

The borrower doesn’t necessarily have to have a fantastic credit score to qualify for an SBA loan. These lenders will be interested in how the company makes money, where it operates and the character of the borrower. In order to qualify for an SBA loan, the business must meet the administration’s definition of small. It must be a for-profit company operating in the United States. And the business owner must be contributing equity or time into the venture. The borrower must also have a good credit history.

SBA 7(a) loans can be used for many different types of business expenses including:

  • Startup costs – Getting a new venture off the ground can be very expensive. SBA loans can be used for everything from hiring new employees to advertising the business.
  • Buying an existing business -If you have demonstrated that you have experience in the industry and a solid business plan, an SBA lender can provide the funding to buy an existing business.
  • Working capital – Business owners use SBA loans to do things like pay employees or buy more inventory to keep the venture moving forward.
  • Purchase equipment – These loans can cover the cost of a big, infrequent purchase like machinery, furniture and work vehicles.
  • Acquiring land or real estate – SBA loans can also be used on the physical space your business occupies. That could be a mortgage on the building, moving to a new facility or adding another location.
  • Repairing existing capital – The small business might need to upgrade technology and buy new computers or repair vehicles in the company-owned fleet.
  • Refinancing debt – This is taking out a loan to refinance and restructure other types of debt.

The new head of the SBA, Jovita Carranza, is vowing to increase access to SBA loans during her tenure.

Is an Equipment Loan Different from a Traditional Term Business Loan?

Traditional term business loans and equipment loans are often the same thing. They are used specifically for buying new equipment for your business as well as making other investments in it. Because these loans are often tied to physical purchases, the interest rate can be lower because the purchase itself is natural collateral. The fixed payment schedule that comes with these loans helps with budgeting and cash flow in a small business.

Is a Business Loan a Good Idea for My Business?

Financial advisors would generally not recommend taking out a loan just for the sake of taking out a loan. But your endeavor may be at the point where small business loan shopping is a good idea. You might need a new space for your business if you are working out of something that is too small or the location doesn’t work anymore. You might need a cash infusion to purchase new equipment to keep up with the workload or technology. Your business might be seasonal and need money to make it through the slower times. Or you might want to take out a small business loan to establish credit for the future.

Borrowing money just to meet monthly expenses is not a good idea. But borrowing money to fuel future growth and expansion might be good for your business. It’s important to examine the reasons behind needing the loan. Are you falling behind on meeting your regular expenses? Is your business not producing enough income? Has your original business plan changed? Are you setting your goals and expectations too high? If the answer to any of those questions is yes, a loan might not solve these problems.

A business loan is only a good idea if the business will generate enough income to repay it.

Qualifying for Traditional Term Business Loans

Lenders take into consideration what is known as “The Five Cs” when it comes to considering an application for a business loan.

  • The first C is Character. How has the loan applicant handled other credit obligations both personally and professionally?
  • The second C is Credit Capacity. The lender will do a complete financial analysis to determine if the borrower has the capacity to repay the loan.
  • The third C is Collateral. A lender wants the borrower to have something that backs up the value of the loan.
  • The fourth C is Capital. The lender will want to know if the borrower owns something else that they can sell for cash to repay the loan.
  • And the fifth C is Comfort or Confidence in the Business Plan. A lender will take an in-depth look at the proposed income and expenses of a company before investing in it.

How Do I Apply for a Traditional Term Business Loan?

It takes a little homework to apply for a business loan. You should gather all of your information ahead of time and examine your business closely to see if there is anything you can do to make it look better. Your potential lender is going to want a lot of information from you. Some of it is personal stuff like the information that is on your resume. The lender will want to know things like your level of education and your work experience.

They will also want a look at your personal financial information. They will check your credit score and the scores of anyone else who is a principal in your business. And they will want a financial statement from the business along with a cash flow projection. They will want to see the company’s debt-to-income ratio. Sometimes a lender will want to know more about your business plan or even better understand your industry. As a small business owner, you are the expert about your business. Be prepared to explain all about it from top to bottom.

Conclusion

A traditional term business loan can be the influx of cash a small business needs to fuel growth. These loans are typically used to fund large projects. Maybe it’s time to move the business to a new location. Maybe it’s time to consolidate and pay down debt. Or maybe you have to buy new equipment to keep up with the demands of the marketplace. Taking out a traditional term business loan is the most common way business owners fund big financial needs. These loans can be difficult for new business owners to qualify for. Lenders generally award them to established businesses with a solid financial track record. But if you qualify you will receive the money in one lump sum. And you will know the repayment schedule and on what date you will fully repay the loan.

Short-term loans are paid back quickly but come with higher interest rates. Intermediate-term loans are the most common loans for small business owners. They are repaid in a few years. Long-term loans can last as long as 25 years but often come with restrictions on how to spend the money. The SBA is one resource that connects small businesses with lenders.  Taking out loans and faithfully repaying them is a way to build a good credit score for your business. Taking out a loan that your business can’t afford can mean financial disaster.

Restaurant Loans to Get Your Business Cooking

Many of us have dreamed of owning a restaurant. However, the startup cost alone is enough to make many of us intimidated. After all, most of us don’t have the money to fund our dreams of owning a restaurant out of pocket. But it’s not impossible. It just requires a fundamental understanding of the process and the types of restaurant loans available for this type of venture. As a future restaurant owner who needs funding, you need to familiarize yourself with how to position yourself to get a loan as well as the different types of loans available to you.

You Need A Loan for Your Restaurant…What Should You Do?

Any restaurant owner in search of restaurant loans starts by asking themselves what’s the best way to go about getting funding and how they can make themselves look more attractive to lenders. This is a smart question. Before you’re approved for a loan there will be many things a lender will need to look at to determine if you’re a good candidate for a loan. They will be trying to determine if you’ll have the means to pay back the loan. They will also take a look at your past financial situations and evaluate how well you honored previous loans or financial obligations.

And they will assess how much of a risk funding you might be. As a result, it will be in your best interest to have and be able to prove a history of financial responsibility. Have you paid your creditors on time? Have you defaulted on any other loans previously? These are all valid considerations that most lenders explore. This is why you’ll need to prepare before you run off and apply for a loan for your business. You’ll want to know how good your credit is and clean up any areas that need it before you apply.  Restaurant owners need to learn the nuts and bolts of how to finance a business to prepare to apply for restaurant loans.

What Type of Loan Do I Need?

As a restaurant owner, you need to understand why you are seeking a loan. Do you need new equipment? Are you unable to purchase supplies for your business? The reasons you need funding can be wide and varied. However, you need to be clear on why you’re borrowing money and where you intend to use it before you apply for it. If you don’t have a clear intention for why you’re borrowing money, your use of the finds will probably be misdirected.

You identified the need and were clear about what the money would be used for. This prior knowledge of how you will use the funds is helpful and will prevent you from spending. Business owners have a wide variety of needs. The loans you seek should be a direct reflection of what you truly need to run your restaurant. This is why you need to consider why you’re seeking a loan for your restaurant before you start small business loan shopping. Determining your why will help you decide what type of loan will be best for your restaurant before you business loan shop.

The Steps of Getting a Restaurant Loan

Once you’ve determined your why you’ll need to take very specific steps to prepare to apply for a business loan. First, you’ll need to determine how much you need to borrow. Once you’ve determined that, you’ll need to put together a business plan. Most lenders will want to see this. A business plan should consist of your tax returns, both business and personal, for the past three years. You’ll also need to provide balance sheets that show cash flow.

Profit and loss statements should also be included. Financial statements and projected revenue as well. All of this information should be gathered and submitted along with the application. Your application, along with the information and documents you submit, will paint a clear picture of your business. This will help lenders determine your risk factors as well as how likely you are to pay the restaurant loans back and follow the terms of the loan without defaulting.

Don’t Forget About Your Credit Score

Lenders will look at your credit score in conjunction with everything else. This means that the day before you apply for a restaurant loan should not be the first time you look at your score. In a practical and functional sense, you need to look at your credit and score well in advance to fix any errors that you may find. This is primarily because any errors that you find may take time to correct.

Also, you want to start looking at your credit score well in advance because there may be things you can do to improve it before you apply for your business loan. Give your credit as much TLC as possible. Your credit score may determine whether or not you need collateral to be approved for a loan as well as the type of loan you’re approved for and the interest rate. However, there are a variety of different loans you can choose from to get your restaurant off the ground or to get whatever you may need for your restaurant.


SBA Loans

You may want to consider applying for a Small Business Association or SBA loan if you need substantial things for your business. These loans can be expansive enough to include construction, which means that you might be able to finance the construction of your restaurant. SBA loans shouldn’t be considered to meet the smaller needs of your restaurant. These loans are usually pursued when you have major things to accomplish and need a sizeable loan to get your restaurant running and off the ground.

The eligibility requirements can be quite difficult to meet and you may be required to provide a lot of information to qualify. However, if you are approved for this type of loan the benefits can be extremely beneficial. SBA loans allow the loan holder to choose between both fixed and variable rates. Plus, SBA loans will fund up to ninety percent and the loan terms can be up to twenty-five years long. The benefits don’t end here, however. An SBA loan is guaranteed by the SBA which makes it a safer loan if you default on the terms. Plus, there are different types of SBA loans.

  • SBA 7(a): Large expensive business needs
  • Then, SBA 504: Real estate and construction projects
  • SBA Express: A smaller loan that can be used for emergency funding that can be delivered within forty-eight hours and has a fifty percent SBA guarantee

The application process is involved in that you may be required to provide proof of ownership and financial reports. Background information may also be a requirement for an SBA loan. Collateral may be required as well. However, an SBA loan may be one of the more beneficial restaurant loans to apply for.

Equipment Financing Loans

Fortunately, there are many different types of restaurant loans you can apply for. You may have a physical location for your restaurant already secured and funded but lack the equipment you will need to operate your business. This means that there are specific things that your business will need. As a restaurant owner, you may want to get an equipment financing loan to lease the equipment you’re going to need to operate your business. For example, you may need commercial kitchen equipment, amongst other forms of restaurant equipment. In this situation, an equipment loan could be really helpful. One clear benefit of these loans is that the equipment you lease acts as collateral.

This usually translates into lower interest rates. These loans can be used to lease a wide variety of different types of equipment, from heavy machinery to computers. Keep in mind, however, approval for this type of loan usually requires good credit. However, if you are creditworthy it may be a good idea to apply for this type of loan because you’ll get current equipment and up to date. You’ll also pay a lot less than you would if you were buying the equipment outright. Leasing provides flexibility to the restaurant owner by allowing him or her to stay up to date with the latest equipment without worrying about upgrades. Plus, it allows you to use a piece of equipment for as long as you need it without being stuck with it.

Term Loans As a Resource for Your Restaurant

As a restaurant owner, you may benefit from a term loan. These loans are helpful when it comes to funding a wide variety of your needs. These loans are traditional and can be used to meet many different needs. They are coveted because they usually come with flexible terms and fixed or predictable interest rates. These terms may be difficult to qualify for if you don’t have good credit, however. You may also be required to provide collateral for this type of loan. The required documentation may be extensive as well. You may be required to provide many documents, including financial documentation.

However, if you can qualify for this type of loan, they generally have lenient repayment terms, leniency when it comes to the amount of the loan, the repayment terms, and the type of lender. These loans can be acquired through traditional lenders as well as unique or alternative lenders. These loans may be a good option for you if you’ve been in business for a few years. They can also help your credit rating. Loans can be beneficial in providing you with the funds you need and improving your credit when you follow the terms of your loan.

Commercial Real Estate Loans for Your Restaurant

If you’re looking to build, rebuild, or buy a commercial building for your restaurant, you may want to consider this type of loan. These are traditional loans where the real estate is used as collateral which makes them secured loans. These types of loans can be used as restaurant loans and often come with attractive interest rates. Similar to financing a home, the terms often allow you as long as thirty years to pay them off. However, you can often get a better interest rate if you opt for a shorter repayment period.  Regardless of what you decide, this type of loan will fund shelter for your restaurant business, should it be leasing a space or building your storefront.

A Line of Credit for Your Restaurant Needs

You may have different things that come up that you need funds to take care of. In situations like this, a line of credit may be attractive. This type of funding allows you to purchase whatever you need, as you need it, up to your credit limit. A business line of credit is similar to a conventional credit card. You only pay interest on the amount you spend. This is a form of unsecured business credit that provides lots of flexibility.

You can withdraw funds as often as you need, repeatedly, up top your limit, and you don’t have to go through a lengthy application process repeatedly. You simply withdraw funds as you need them. Although good credit makes it easier to secure a business line of credit with a good interest rate, you may still be able to get one without perfect credit. However, the interest rate may be significantly higher and you may be required to secure the loan with collateral. A line of credit can still fall under restaurant loans because it’s funding you borrow to meet the needs of your restaurant business and restaurant loans can come in many different forms.

A Different Approach to Secure Funding

If you’re just starting out and don’t have much business credit, you may have to take an alternative route to get the funding you need for your restaurant business. A personal loan may be your best bet if you want to secure funding for your business at a decent interest rate. Of course, a personal loan will be dependent on your personal credit in terms of your chances of approval and your interest rate. However, if this is the only way to secure funding for your business, this may be a good route to take.  These loans are attractive because you don’t need to provide financial material regarding your business.

Lenders will only be looking at your personal credit and your income. Forget having to come up with tax returns for your business, six months of profit and loss, and other financial data a business lender may request. Plus, it may be quicker and easier to secure a personal loan for your restaurant business instead of a business loan. However, buyers beware. A personal loan may be easier to acquire but if you default on the terms it can affect your personal credit.

Even if your business fails the money you owe will continue to impact your personal credit. A personal loan will also inflate your debt to income ratio. Plus the money you borrow may fall short of the funding that you’d get for typical restaurant loans. A business loan can be for millions of dollars.  Most lenders won’t fund a personal loan for millions of dollars.

What are the Best Terms for Restaurant Loans

It may be difficult to determine how long you should take to pay back restaurant loans. Typically, short term loans are used to cover an emergency. You usually have no longer than eighteen months to pay them off and the interest rates are typically higher. Conversely, long term loans typically have better interest rates and can be funded for much larger sums of money.

Typically, that amount can be negotiated between you and the lender. Lenders who offer long term loans usually won’t fund a loan for a small amount of money. Unfortunately, if your credit is less than good, a short term loan may be all you qualify for. The interest rate for short term loans can be as much as eighty percent depending on the terms and your credit. Nevertheless, if this is one of the only ways to secure a restaurant loan, it may be well worth it to apply for this type of funding. You will need to repay short much sooner. And the amount you can finance will be typically less than the amount of a long term loan.

What Do I Do to Secure Funding for My Restaurant Business

Understanding the needs of your business as well as your financial status and standing are pieces to the big puzzle that you need to put together to apply for a business loan. If you are familiar with all the puzzle pieces that make up your situation, you have the information needed to apply for a business loan. You should start by understanding clearly why you feel you need a business loan for your restaurant. Do you need equipment? Are you trying to establish business credit? Do you need to lease space for your restaurant?

The reasons may be many. Your only job is to be clear about why you need the funding and what you will use it for. This clear understanding of the needs of your business serves as guidance and a roadmap when it comes to determining the best kind of funding or restaurant loans for your business. If you are clear on your why it should be easy to determine how much you need to borrow. With these two pieces of information in place, you can create a business plan. Check your credit early, know your score, and clean up any errors.

You’ll also need to gather all your financial information for the application process as well. These are all fairly universal steps for applying for a business loan. Make sure you’ve taken all the necessary steps to prepare yourself for the application process and have considered what type of loan would be best for you.

Know the Benefits and Risk Factors for Different Types of Loans

There are many different types of restaurant loans. The type of loan you choose should be dependent on the needs of your restaurant business as well as your specific situation. However, regardless of the type of loan you choose, you need to be familiar with the benefits as well as the possible pitfalls of each type of loan. For example, if your greatest need for your business is equipment, it’s probably best to apply for an equipment loan.

The equipment you lease will serve as collateral and you will pay a lot less by leasing instead of buying. However, if you default on the payments, you may find yourself without the vital equipment you need to run your business. This is why it’s a good idea to become familiar with the worst-case scenarios of any business loan you choose to pursue. This knowledge will help you to honor the terms and conditions of the particular loan you are trying to acquire. The terms of each type of loan will depend on the specific loan.

Some loans will require you to come up with collateral. This means you could risk losing something is you default on the terms of the loan. Other loans may not require collateral, however, defaulting on the terms may hurt your business credit immensely. Regardless of the type of restaurant loan you apply for, you should be aware of the pros and cons. Full awareness should be part of the preparation and application process. Use your knowledge about the various types of loans to make an educated choice regarding the best loan for your restaurant.

Closing Words

You must have a fundamental understanding of your financial situation as well as the needs of your restaurant business. Although there are a variety of different restaurant loans you can apply for, you must first understand what your restaurant needs. And how much funding it will take to meet those needs, in order to choose the most appropriate loan for your business. This type of awareness will act as a guide when it comes to selecting a loan that will adequately meet the needs of our restaurant business and help it to grow.

You should also familiarize your self with the pros and cons of different restaurant loans. This will also help to narrow your choices until you decide on one that best suited for you. The preparation process will be similar regardless of the type of loan you apply for unless you’re applying for a personal loan. Personal loans require less and are usually based on your personal credit and your income. Unlike business loans, they are usually much easier to apply for. However, the damage they can do to your credit can be substantial, should you default on your payments. Know the needs of your business, familiarize yourself with your credit, and determine why you need a loan and how much you should borrow.

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.