If small business owners had the choice between climbing a mountain or trying to get a loan to tide their enterprise over for a few months, they would probably choose the mountain. This is because banks are notoriously uptight when it comes to lending a helping hand. It’s a real Catch 22 situationbecause small businesses often need a loan to start up or to grow before their service looks good on paper. Cashflow is required to cover daily expenses such as inventory and payroll.
However difficult you may believe this process to be, there are some ways that you can go about applying for financing so that the odds are very much in your favor that you will get it.
You Will Be Asked Why You Need The Money
It goes without saying that the lender will want to know why you need the loan. The only acceptable answers are:
- It’s seed money to start a business. The chances are that the lender will want to know what business you want to start and how much of your own cash you are investing yourself.
- You need cash to fund your daily expenses until your business takes off. The lender will want to know why you didn’t factor these expenses into your initial plan.
- You want to expand your business. This is what lenders want to hear. A growing business is a good investment, but you will have to present the numbers that support your expansion.
- Your business needs a safety net. If you don’t have the extra cash to act as a cushion for unexpected expenses, you will need to buoy up your residual money by means of a loan.
How To Find The Best Kind Of Lender
Of course, the answer to the above question is, “one that says yes.” But there are also other ways to select the right small business funding for your business. You should choose a lender the same way you would approach buying a car. Do your research to find the best APR (annual percentage rate) and the terms under which the loan is extended.
It is important to be realistic in your expectations here. The lender has to take into account such things as how much you hope to borrow, how long you have been in business, what is your monthly revenue stream, and how good is your credit. Once they come back to you with the loan amount and percentage rate, it is up to you to determine if you can comfortably afford the monthly repayments.
Don’t settle for accepting the first loan offer that comes your way. Make applications to as many suitable funding institutions as possible and reduce the number down to two or three. Then decide from this group the best loan offer on the table.
You are in business for a reason. You are excellent at what you do and forward thinking enough to predict your spending patterns. Small business funding is not as difficult as it is made out to be.