Getting traditional funding or bank financing for your business is something that you should always be on the lookout for. This is why you need to be prepared and know how to get a business loan so you can take advantage of opportunities when they arise.
Whether you’re looking to expand or shore up a weakness, there are multiple lenders you can turn to that can provide you with whatever kind of business loan you need.
It is your responsibility to find the best small business loan. This can take a lot of research and time, but we can provide you a head start with the information below.
Exploring business loans doesn’t have to be difficult. Use the tips below so that you know how to get a business loan. Then you can begin looking for the financing that will carry your small business to the next level.
1. How to Get a Small Business Loan Means Knowing Why You Need It, and How You Plan to Use It
Your first step should be to do research and then explain in clear detail why you need a loan and how you plan to use it.
The clearer you get on this, the easier it is to prioritize your search for a business loan. This planning prevents you from biting off more than you can chew with a long-term loan that doesn’t properly serve your short-term needs, or vice versa.
Ask your upper management team to make a decision about your financial needs and to draw up plan to successfully use the loan. The clearer you lay out these details the more precise you’ll be when searching for lenders.
2. Assess Your Financials and Business Credit
During the research and planning stage, open your financials, and lay everything on the table. You need to know how much money you have coming in on a regular basis to understand how much of a loan you can comfortably afford.
During this time, you should also explore your business credit to be sure you’re in a position to receive the friendliest terms and most reasonable interest rates. From here you can quickly pivot and start reaching out to financing companies.
3. Look Into Small Business Administration (SBA) Resources
Learn as much as you can about Small Business Administration (SBA) loans and how they can take your company to the next level.
This organization helps businesses like yours whenever you’re in need of a business loan. The SBA provides free business counseling, government contracting opportunities, and courses and seminars that help you manage your business.
Read up on the many different SBA grant and loan programs that can lift your business up and help you expand. By checking with the SBA first, you are more likely to get the lending that you need.
4. If You Already Know How to Get a Small Business Loan, Then Reach Out to Financial Institutions You’ve Banked With
When you’re looking for a business loan, it’s easier to get approved for one when you choose a lender that you’ve already done business with. If you had a good relationship in the past, most likely it will continue in the future.
If you’re going to speak with a new lender that you have never done business with, check their customer reviews. Look into credit union memberships, as they tend to have several business-friendly products that you can take advantage of.
5. Research Asset-Based Financing as an Option
You might prefer to go the asset-based financing route for your small business. These loans give you plenty of options outside of traditional loans. With this type of a business loan, you will use your company’s existing assets as collateral to secure the loan.
When you apply for asset-based financing, you can put up things such as accounts receivable, machinery, inventory, real estate property and other assets. Since these are assets you already own, your ability to get approved for a business loan is more in your control.
This puts more options at your disposal and speeds up the search for a business loan.
6. Explore Different Business Lines of Credit
There are other financing options you can look into outside of traditional funding. You can try getting approved for a bank line of credit that can help your business’s cash flow. The beauty of a line of credit is that it’s a revolving door.
When you pay back what you’ve borrowed, you can keep drawing more money for whatever your business needs. Compare this to a term loan, where once you pay it back, the loan is closed.
With lines of credit, always be aware of what the interest rate is. The yearly amount of interest you pay will keep increasing if you’re only making the minimum payments each month. Pay down your line of credit as quickly as you can, and you’ll be able to draw from it again whenever you need to.
7. Payroll Funding is a Great Source for Financing
Payroll is sometimes difficult to keep track of. When a business starts struggling, the first step is always to look for expenses in the business that can be cut.
If you get to this point, the last place you want to get to is not being able to pay your employees. Rather than getting there, you can take on a business loan to cover your payroll.
Payroll financing is one of the more common types of business loans, and it’s essential if you’re trying to keep your business afloat. Keep company morale high and continue paying your employees and making payroll when it’s due.
This way, you’ll have the foundation to push the business forward and stay out of trouble by not covering payroll.
8. Consider the Interest Rates
No matter what sort of business loan you take on, it’s important that you get clarity on the interest rate. When you go to a traditional bank, you might expect interest rates between 4% and 13%. Going with an SBA loan will get you interest rates in the 7% to 10% range.
Interest rates can fluctuate, and they depend on the state of the economy and your relationship with the lender. Make sure to look into the additional fees that are listed in the loan agreement, so you know the total picture.
9. Go Over the Terms of the Agreement
Before signing on the dotted line for any small business loan, you should get another set of eyes on the loan agreement. Send a copy to your lawyer and an accountant so you can get their feedback on the terms of the agreement.
By getting their seal of approval, you can feel more comfortable moving forward with financing. This extra step will give you tremendous peace of mind as you search for a business loan.
10. Research the Lender’s Reputation
Above all, only do business with trusted lenders who have been around for a while. Look up their Better Business Bureau (BBB) profile and take a look at the grade. If their grade is listed as A or A+ you can confidently move forward getting a business loan from them.
Find out what their customers are saying around the web about the experience they had. If they leave reviews saying they had a great relationship with the lender and would gladly use them again for another business loan, this is a good sign.
Carefully look through the lender’s website and educate yourself about the different business loans and services they offer. Many of these lenders also offer business insurance, payroll processing, and other business services that you can take advantage of.
The more business you can get done under one roof, the better.
11. Weigh Your Options and Develop a Plan for Paying It Back
Before accepting any proceeds from a business loan, you need to know exactly how you intend to pay it back. Strategize with your management team to make sure your repayment timetable is realistic and achievable. Make certain that your plan for using the business loan is in your business’s better interest.
Put the business loan to good use in a way that improves your business’s cash flow and increases its profits. Borrowing money is part of doing business, but make sure that taking out a business loan puts your company in a better place and helps secure its future.
Now You Know How to Get a Business Loan and It’s Time to Let Us Help You Find One!
These tips explain exactly how you can safely search for business loans to help your company grow. Following these simple guidelines on how to get a business loan can be a make or break for your business.
Once you weigh your options, we’re confident that you’ll find us the best in the industry for any lending that you need. At Your FundingTree, we make it our business to match companies like yours with the financing that best suits you.
We have an assortment of business loan types and would be happy to explain them to you. Contact us online to learn more about how we can help you get a business loan or give us a call at 704-904-0774.