Being the owner of a small business is a huge venture. At some point, while your company is still new, you will probably also have to take out a small business loan to keep things moving along smoothly or to expand. While this might seem intimidating, it’s important to know how to go about securing business funding to ensure that your company can grow and thrive. There are five things you need to know about small business loans.
Consider Small Business Administration-Back Lenders
As a rule of thumb, you should always first consider securing an SBA loan from Small Business Administration-backed (SBA) lenders. SBA loans are specifically available to owners of small businesses, but sadly, many small business owners automatically assume they are ineligible for them. This is the best option available, however, and you can find an SBA loan that includes broad repayment terms and low interest rates. It’s also important to keep in mind that, just because one SBA lender turns you down for their loan doesn’t mean others will as well.
Consider the Lender’s Thoughts
One thing that many business owners never do is to take the lender’s situation into consideration. No matter what, the lender always wants to be paid back. When you apply for a loan, you should treat it the same way as if you were applying for a job. Your application should be excellent and you should clearly outline your financial situation to the lender. In some cases, you may even have to show that you have something available as collateral, such as your vehicle or even your home. This shows the lender that you are serious about your business and truly believe in it. Maintain good cash flow, and a good credit score, and dress professionally to really impress the lender.
Borrow Only What You Actually Need
Many small business owners tend to borrow more money than they actually need, which can be a factor for lenders. Be fully aware of your finances so that you can determine a precise amount you need in a loan. It can make a better impression on the lender and give you a better chance of securing the loan.
Learning from Mistakes is Beneficial
Often, it’s not uncommon for business owners to be rejected for a small business loan. If you are turned down for a loan, ask the lender for the reason why. It’s a good idea to learn the reason for the rejection because chances are high that other lenders will turn you down for the same reason.
Lenders Want to See Certain Documentation
You should also keep in mind that lenders often request to see certain documentation when you apply for their loan. This is because they will only provide a loan for business funding when they can see that you are a responsible business owner and are fully capable of paying it back. Typical documents lenders want to see include cash flow, business plans, balance sheets and profit and loss statements.
Overall, if your finances are in good standing and you can prove that you can pay back it back, you should be able to secure a small business loan. To apply for a loan to expand your company, please consider Heritage Bank.
As a Business Banking Professional, Kim helps businesses providing commercial loans specifically meant to provide a business with the capital needed to start-up or expand. In her role, she interacts with entrepreneurs and business owners concerning future financial investments in an effort to help the business find the strategies that would work for them.
Vice President • 770-515-7028 • [email protected]