If you’re running a small business, chances are you’ve thought about applying for a small business loan. Obtaining finances for your company is never going to be easy and a small business loan might just be the right solution to all of your problems. Still, you can’t just show up in a bank or a lending company and take a loan. There are some things you need to have in mind if you want to make sure you get the best deal possible. Here are 5 of them you simply can’t ignore.
Why do you need a loan?
One of the most important things you need to know when applying for a small business loan is why you need it in the first place. Only if you manage to come up with good ways to spend the money you get will you actually be able to obtain the loan. On the other hand, if you’re applying for a loan just for the sake of it, chances are your application will end up being declined. Luckily, there are so many great ways a small business can take a loan and you should be able to figure it out. For example, you can use the money you get for launching a new product or moving to a new location.
How much money do you need?
There’s no point in applying for a loan if you’re not going to get enough money to finance your next move. So, once you figure out what you need the loan for, you also have to think about how much money you’re going to need. So, if you need the money to launch a new product, you might first want to come up with a price point as close as possible to what you’re going to need. Not only that loaning less that you need might not be enough to finance the project but if you loan too much, paying off the loan will be more difficult.
What’s your credit score?
Another thing you’ll want to do before you apply for a loan is check your credit score. And by this, we mean both your personal score and your company’s credit score. Checking both scores is extremely important since your chances of getting a loan depend on them. Not only this, but your interest rate and loan terms are also driven by both of these scores. Luckily, there are lending companies with loan deals designed specifically to help companies with bad credit score. If you don’t know what your personal and business credit scores are, bear in mind that you can get a free credit report once a year.
What are your payment terms?
Once you’re offered a loan deal, you probably don’t want to accept it right away. It’s always a good idea to take some time to go through all the terms and conditions and make sure you’re making the right move for your company. Fail to do this and you might find yourself accepting a loan deal that simply doesn’t do the trick for your business. We recommend turning to commercial lawyers who can help you go through all the terms and figure out whether accepting the deal is a smart move. Understanding fully how payment terms work might just help you save your business some money.
Do you have all the documents you need?
Of course, applying for a business loan means you’ll have to deal with a lot of paperwork. It’s recommended that you go through all the paperwork before you submit the application. Documentation required depends heavily on the lender but there are some documents you’re most likely going to need. We’re talking things such as your licenses, third-party contracts, commercial leases, financial statements, a list of potential collateral, business and personal tax returns. If you’re not sure how to obtain all of these documents, asking your lawyer for help should do the trick.
Have all of these things in mind and you should be able to obtain a loan that’ll help your small business move forward. Just make sure you focus on repaying the loan just like you’ve agreed to in order to avoid any extra fees.