Financing your business is a crucial step to expanding and often just to make it fully operational.
Nearly every business will need financing because simply waiting for your revenue to pick up and build your cash reserves will take too long.
Small business financing may be a loan, line of credit, merchant capital advance or some other form.
There are several things you’ll want to know about financing your business in order to get started on it.
When Can You Finance A Business with A Loan?
Every lender has different requirements regarding how long your business needs to have been established to qualify for a loan.
If you’re just opening and forming your business, you’ll likely have to use your own savings to get started.
You may need to use a personal credit card, borrow against your home equity if you’re a homeowner, or ask friends and family if they’d be willing to loan money or invest in your business.
But if you’ve been in business for at least two years, you’ll usually have at least some loan options available.
Other lenders may require at least five years of business history before they approve you for a loan.
Which Financing Option Should You Choose?
It might be tempting to go with a lender who promises the quickest approval and shortest wait period for funding.
But that’s not always the best way to do it.
Look for small business lending companies who offer the fairest terms on their financing.
You want to lock in the lowest interest rates possible. Also, make sure you aren’t paying high repayment fees in case you are able to pay your loan off early.
And find out whether the lender requires a personal guarantee for the loan.
Do plenty of research on a small business lending comparison site like Lantern Credit to ensure your business gets the best terms for its needs.
There are also other financing options such as a merchant cash advance. Or consider invoice factoring which are not loans but offer capital based on credit card sales or outstanding invoices.
They can come with other catches though, and may end up causing a cash flow shortage if you aren’t careful.
Steps to Getting Small Business Financing
Whether you decide to obtain business financing from an online lender or meet with a traditional bank loan officer, you will need to show quite a few documents.
These include your full financial documents pertaining to bank statements, taxes, revenue sheets and other relevant information about your assets.
Some lenders may want documents detailing an appraisal of the value of your business.
Loans to purchase equipment can possibly be secured by the value of that equipment.
Other lenders rely more on data they’ve gathered online to determine how much money you can borrow.
In conclusion, you can get financing in many different amounts from as little as $5,000 to as much as $5 million in working capital depending on your business’s eligibility.
Once you receive your business funding, it’s important to spend on areas that will yield revenue and grow your business into a success.
But you should always compare lender’s quotes and loan terms to make sure you find the best option for your business.
Image credit: Image by Nattanan Kanchanaprat from Pixabay.
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