How Can a Small Business Loan Help your Business Grow?

You can help your small business grow in a number of ways, but one way is to take out a small business loan.

small business loan

It is essential to raise capital whether you are just starting out or are looking to take your business to the next level.

Great ideas are just ideas unless there is money behind them to transform them into reality. When you are a small business it may seem that chasing money is never ending.

Money can be sourced from personal funds, investment capital and even online personal loans.

Taking out a loan is not the worst option. In fact taking out a small business loan can be a solid business decision.

Entrepreneurs that take out small business loans will do from lenders that are primarily interested in making sure that you are able to repay the loan in a timely manner.

As long as you pay on time, the lender will not concern themselves with your business affairs. An investor on the other hand will be concerned with how your business runs.

Make Your Loans Work

It doesn’t make sense to put in the time and the effort in getting an investment if you don’t have a strategy of how you are going to spend it.

Whether you are looking to invest in new equipment, personnel or stock, you need to be clear in your business plan how a small business loan will work for your business. This strategy will also need to include how you plan to repay the loan.

If you are considering loaning money from a traditional lender like a bank or a short-term loan company then you will have a set of terms that you will have to follow.

The monthly repayments will then be the same, the term of your loan will be set and you will not have to worry about hidden fees or charges.

If you are thinking about borrowing money from an investor then you need to take into account equity capital, as these can be complex.

An investor will be interested in the health of your business and the direction that you are planning to take. Over time though their priorities might change, which could mean they began to focus on a new venture.

When you are looking for a loan then you need to find one that you are comfortable with.

 

How to Get a Small Business Loan

How to Get a Small Business Loan

At some point or another most small businesses will need to get a small business loan. This is so that you are able to get operating capital or to finance an expansion.small business loan

You will need to increase your chances of getting a loan and the best way to do this is to be prepared to meet the expectations.

Imagine that someone else approached you for a small business loan. You will want to know why they wanted the money and the chances of them repaying the loan in full.

You need to be prepared in order to get a loan. Firstly get all your documents together that will help in persuading the lender that a business loan is necessary and that you are a good risk.

Documents that you Need

You will need your business plan. The business plan will show the lender why you require a small business loan as well as what you plan to do with the money.

The first question that any lender will ask is are you able to repay the loan. You will need your cash flow projections to give lenders financial data that they can then use to assess the risk.

You can give the lender a fuller financial picture by preparing a list of your personal assets and debts.

If your business is established then you may have to provide past business tax returns.

A credit rating is established when you buy things on credit and pay back the money you owe. Your repayment history forms a large part of your credit rating. It is not necessary to include a credit report with your small business loan application, as lenders are able to check your credit rating.

Making the Presentation

You will then need to persuade the lender that your business is viable and a good credit risk. You need to create a winning loan presentation so prepare in advance.

You should first take into consideration the lenders point of view. They will want to know why you need the money and if you are a good risk. You will need to know the answers to these questions.

The first question can be answered with all the details in your business plan and being able to point to the relevant financial statements, graphs or charts that will help you in convincing the lender that you need the amount of money you are asking for and is what you need to do what you need to do.

In the second question you should have already given thought to your credit risk and be ready to address the lenders concerns.

In order to get a small business loan you will need to tell the lender the collateral you have, the money that you are personally willing to invest in the business and your experience in your chosen field.

You then need to have your documents in order and be prepared to address any concerns that the lender may have to increase your chances of securing a small business loan.

Ways to Fund a Small Business

Ways to Fund a Small Business

One of the most difficult challenges is the financing of a business. You will need startup capital, funds to get you through the first few years and money to expand. Here are your options to finance a small business.

Small Business Loanssmall business loans

If you need quite a bit of a capital to fund your business, then a small business loan can provide the money that you need with a low interest rate. This is one of the less expensive ways to secure funding.

Crowdfunding Platforms

You are able to go directly to the masses and get funding. With crowdfunding you will need to make your pitch and post it on the platform. People are then able to contribute towards your fundraising goals. There are cases where you will be able to keep the money raised even if you haven’t met your goal, but with others it’s an all or nothing case.

Advance Orders

If you already have a clear value proposition and already have customers ready then you could make money through advance orders or presales. You will then get a working capital and it will also validate your business.

Personal Assets and Savings

The easiest form of funding is to acquire pre-existing money. You are also able to lower the interest rates on your loan by offering your car or home as collateral. There are risks though in cashing in your 401(k), using your emergency funds or taking a personal loan.

When you cash in your investments and savings then your income will come solely from your business and this can be a risk.

Grants

You can take advantage of grants from governments and nonprofits. This is worth investigating and seeing what your options are.