Determining if You Qualify for a Business Loan
Have you determined that your established small business could use additional funds for working capital, debt consolidation, a commercial real estate purchase, increased inventory or more?
The wrong loan can do more harm than good; you don’t want large payments to crunch your cash flow. Your goal should be to secure a low-cost loan with low-rates, a long term and no payback penalties. Not sure where to start? Here are six questions to ask yourself before you jump in.
Is My Business Loan Ready?
Taking an in-depth look at the financial health of your company can save time and effort before you pursue a loan. Of course, not every small business has a CFO or other professional on hand to review financial details.
SmartBiz Loans® has an online tool that acts as your Intelligent CFO™ to determine if your business is loan ready. Our SmartBiz Advisor™ program helps you learn where you stand for each of the key areas banks use to evaluate your business. If you’re not quite there, we recommend ways to increase your likelihood of approval when applying for the low-cost funding you deserve. Visit the SmartBiz Loans website for more information on this new, no-cost tool.
What Type of Loan is Best for My Business?
The best type of loan to help grow your business and save money has low rates, long terms and low payments. The SmartBiz Loans Small Business Blog lists types of loans out there and gives the pros and cons of each. SBA Loans vs. Alternative Loans. Why should you choose an SBA Loan? These government-backed loans are known as the “gold standard” in small business loans because of the low-cost, 10-year terms and no payback penalties.
What are Fees and Other Costs?
Transparency is important. When shopping for low-cost funds to help grow your small business, the lender should disclose fees and other costs up front. Many small business loans include Origination Fees, Processing or Application Fees, Guarantee Fees, Pre-payment penalties and more. These can add to the cost of your loan and increase your payment amount. Be sure to check with your lender so that all extra costs are disclosed before you sign on the dotted line.
Which Loan Provider Should I Use?
Finding a lender involves more than just getting a good interest rate; you want to work with the most reputable company, staffed by financial professionals who can guide you through the process. Check out Google Reviews, TrustPilot or ConsumerAffairs.com for reviews from real small business borrowers. Sites like FitSmallBusiness and NerdWallet frequently write about honest and efficient companies in the lending space. Don’t forget about the good old personal referral. Ask other business owners if they’ve had a good loan experience and if they have any recommendations about who to work with.
How Would I Use Loan Proceeds?
From marketing to real estate purchases, there are a plethora of ways to use low-cost funds to fuel growth and savings. Most lenders want to know what you’ll do with loan proceeds. The SmartBiz Small Business blog regularly features customers who have received an SBA loan and asks them about use of proceeds. Here are a few of their stories and how they are benefitting:
Inventory Increase: Success Story: Skate XS
Equipment Purchase: The Tree Guy is Ready to Grow
Debt Consolidation: Triple D Towing
Commercial Real Estate Refinance: Pro Glo Auto Finish
How Much Should I Borrow?
How much you can afford is important, of course. But it’s also critical that you borrow an amount to help reach your business goals. Strive to strike the perfect balance between not borrowing enough and borrowing too much. There are two important documents you need to analyze to come up with the right amount for your business – a cash flow analysis and your business plan. You can also work with your accountant or other financial professional before you ask for a specific amount.
Are you interested in an SBA loan? Try the new SmartBiz Advisor™ online, educational tool to learn about how you can get your business SBA or bank loan ready before you apply – no cost involved. You can assess key criteria banks consider and where your business stands on each. Learn more about SmartBiz Advisor here.