Many business owners would benefit from having more cash. And, thankfully, there are several funding options available to small businesses. But how do you know if taking out a loan is the best option to get the funding you need?
Here are some examples of business needs and situations that are good reasons to get a small business loan:
Taking out the wrong type of loan for what you need can do more harm than good. That’s why it’s critical to understand the different types of small business loans available to you and what works best for your situation.
Here’s a look at seven types of small business loans that may make sense for you.
The main benefit of taking out a loan is getting access to cash at a favorable rate.
You can use these funds to accomplish things for your business that you otherwise wouldn’t be able to. Some common examples include acquiring the resources (such as equipment or additional talent) you need to grow your business, stabilizing cash flow during slow times for seasonal businesses, or funding a business expansion opportunity.
Small business loans also help you build your business credit and establish a good relationship with a lender, potentially making the process of securing another loan down the road a little bit easier.
Generally, for many small businesses, loans are the most cost-effective way to get the funding you need while giving you the control and flexibility you want.
In general, getting a loan for your business will require a good credit score.
Beyond that, qualification requirements will vary by loan type and by lender. For example, the same type of loan from two different lenders may have different qualification criteria. Taking the time to gather documentation, research lender expectations, build your credit report, develop a business plan, and put up collateral can help make the qualification process as smooth as possible.
Qualifying for SBA loans is typically a lengthier process than a bank loan. And funding is usually slower to get to you. However, SBA loans generally have the lowest rates and longest terms, and they’re widely considered to be the gold standard in small business lending.
If you’re considering a loan for the first time, here are seven tips for getting a first-time business loan to help make the process a little bit easier for you.
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Before getting a loan, you should know some of the most common reasons banks and lenders reject loan applications. Some common disqualifiers include excessive debt, a bad credit score, and unequal collateral. Knowing these before you apply will help you identify anything you may need to fix or improve to increase your likelihood of approval.
If you’ve already been rejected, it’s important to find out why so that you can take the appropriate next steps — whether that’s fixing the reason you were rejected and applying again or looking for alternative sources of funding.
The steps you’ll take to get a small business loan will vary depending on what type of loan you’re getting. But, in general, there are four steps to getting a loan.
Choosing the right type of business loan is key to achieving the desired outcome for your business. Don’t make the mistake of believing that the fastest option is the best option. The fastest funding options are typically more expensive, and going down that path can sometimes leave you in a worse financial position.
So how do you choose the right small business loan? Should you apply for an SBA loan or a bank term loan? Is there an alternative option that’s best for your situation?
It can feel overwhelming, but following these eight simple steps will help you navigate the process and come to a decision in which you feel confident.
Know why you need a loan
Determine how much money you need
Review qualification requirements to check your eligibility
Consider how much you can pay per month
Decide if you’ll put collateral
Explore your different loan options
Gather the necessary documentation
Choose your loan and apply
Learn more about each of these eight steps to help you choose the right small business loan.
If you start researching how to get a loan online, you’ll quickly find several lenders and various options. While this can feel overwhelming, you don’t have to spend hours and hours researching every option.
You can follow this simple 5-step process that will narrow your options and help you choose an online lender that’s right for you.
Decide how much money you need
Check your business and personal credit scores
Decide which type of loan is best for your needs
Research and compare lenders
Apply for a loan
When researching online lenders, you should remember to always read the terms and conditions. While one lender might be able to get your funds to you tomorrow, you might see that you’d be paying a much higher interest rate than another lender that can get you funds in 7-10 days.
Thorough research will help you choose an online lender that makes the most sense for you.
SmartBiz is transforming small business banking by leveraging technology, data, and excellent customer service to help business owners access the right capital at the right time.
With SmartBiz, you don’t have to spend hours researching and comparing all the different lending options and trying to make sense of it all. Based on your business needs, our technology and team of experts will find and recommend the best financing options for you and connect you directly with the lender you choose. SmartBiz’s fast, reliable, and secure process helps you find the right loan, from the right lender, at the right time.
