Let's face it. Business owners need access to working capital to run their businesses. In this post, you'll learn how to qualify for funding so your business stays a step ahead of the competition.
Before we tackle how to do that, we'd like to give a shout out to Camino Financial who supplied the valuable knowledge in this article. The company is an expert on improving a business's financial performance and offers an entire educational experience from beginning to end. You can become familiar with the small business loan process at Camino Financial on their website.
Now, let's discover how small business loans work and how to improve your chances to qualify for financing.
THE 411 ABOUT SMALL BUSINESS LOANS
Every day, business owners start or expand their businesses and acquire funding to make that happen and pay for short and long-term obligations. Some entrepreneurs use the money to cover day-to-day expenses, purchase needed equipment, or increase product inventory.
Small business loans are repaid at specific interest rates and terms based on lender requirements. Generally, most lenders consider how long the company’s been in business, the annual sales, personal and business credit scores, and whether the owner can provide collateral in the form of assets. Moreover, some lenders have more stringent requirements than others.
Business owners can apply for loan amounts ranging from $5,000 to $400,000 or more. As part of the lending process, lenders may restrict fund usage on high-risk industries such as gambling, car dealerships, and adult entertainment.
The small business loan process
Once you determine how much money you need, you must find the right lender. Ask questions such as what their approval rating is, other services they provide, and how long it takes to receive the funds. A lender should be transparent about every aspect of the loan process. If they aren't, choose someone else. Tip: loan specialists work with borrowers to find a loan that matches a business's needs.
Once you select a lender, submit an application, provide basic financial records, and await further instructions. In some instances, lenders notify borrowers within 24 hours whether they pre-qualify for a loan.
Then comes the signing of the loan agreement so funds can be deposited electronically into your business account in as little as 1-8 days. Conversely, the loan process can take as long as 30-60 days depending on whether you use a traditional or online lender.
HOW TO QUALIFY FOR THIS TYPE OF FUNDING
Use these helpful tips so you're in a better position to qualify for a small business loan:
- Establish a healthy credit score: Lenders consider businesses with higher credit scores less risky and offer the best interest rates to borrowers with the best scores. To improve yours, always pay your bills on time and never extend your credit capacity beyond 30% of your total available credit. Likewise, you should stay current with creditors and have no past due payments or bankruptcies in the last 12 months.
- Maintain healthy cash flow: Lenders look at financial statements to determine how well you manage cash so that assets exceed liabilities.
- Tweak your business plan: Lenders want to see that you plan for growth and follow specific guidelines when using the loan proceeds to accomplish financial goals.
- Increase your assets: Should your business trajectory take a downturn, you should have assets you can liquidate to cover unforeseen expenses.
A SMALL BUSINESS LOAN DRIVES FUTURE SUCCESS
Cash is king. Without sufficient cash flow, your business can't grow and succeed. If your business is struggling, an injection of cash could be just what it needs. As you've discovered, it isn't hard to get funding when you know what steps to take to qualify for a small business loan. In fact, you may be amazed at how quickly and easily you can gain access to financing. At every step of the way, the lender makes sure the borrower can repay the loan while building a solid financial future.
With adequate funding, you can grow your business to the next level. You could renovate your storefront, set up a website, or hire a social media guru. Why not apply for a small business loan today to keep your business on target for exponential growth? You'll be set to make a difference in your customers' lives locally and globally.