Small business loans shouldn’t be a one-size-fits-all approach. However, all too often, traditional lenders have strict qualifying standards and credit criteria in place before business owners can even begin filing the application. Additionally, business loans aren’t always tailored to the meet the immediate needs of small firms, which puts a limit on just how impactful the new source of revenue can be.
Small businesses have different needs than larger companies, and securing a favorable loan isn’t always easy, especially for business owners who don’t have excellent credit scores or enough collateral to back the loan.
Here are four things business owners should keep in mind to ensure they are getting a loan that works for them:
Amount
The principal loan amount should be addressed right away. If your company requires $50,000 in cash flow, a $10,000 loan from a traditional lender isn’t going to cut it. In many cases, small businesses have to settle for what they can get, which isn’t a promising business strategy.
Be certain you’re receiving enough working capital to complete the task at hand, whether it’s covering emergency expenses or financing an expansion project. Not only will inadequate cash not serve its purpose, but it may cause you to have to scale back your original growth projections, limiting just how large your company can become.
Purpose
Submitting a business plan to a lender is usually commonplace because banks want to see how you intend to use their money. Lending restrictions are usually tighter than standard residential loans, and you need to make sure that the loan you require, and its purpose, is provided by that specific lender, and at the appropriate amount.
There are many different types of small business loans, and some must be used for specific purposes. Coordinating the loan amount with its intended use can be difficult if a lender refuses to budge on their limitations.
Timeliness
Even if you meet the eligibility requirements, it could take days or weeks for the loan application to go through. In the end, your request may not even be accepted, which means you could spend precious time applying for loans that never come to fruition.
The key is to secure a loan in a timely manner. Routine business expenses and operation costs will continue to pile up, and every day there is insufficient cash flow is a day you fall behind. Not only will this cause you to incur more debt, but you’ll also be directing much of your time at trying to stave off short-term problems, thus losing sight of the long-term plans you likely had in the first place.
If a lender doesn’t have a quick turnaround period, then you could be wasting your time.
Repayment schedule
If the loan request is approved, then there will be certain repayment requirements in the fine print. It may be easy to overlook the exact details of the loan and simply move forward with using the funding. However, a repayment plan that is ill-fitting to the reality of your business can unintentionally do more harm than having no cash flow at all.
Some lenders allow monthly payments through automatic withdrawals while others frontload the majority of repayment schedules. The goal is to find a loan that affords you the opportunity to pay back the money in due time, at a pace that doesn’t choke off new business growth or force you further into debt.
National Funding has a host of loan solutions to fit your every need. With convenient one page applications, you can obtain the cash you need with no collateral in as little as 24 hours.
