Business loans are, for most entrepreneurs, a vital part of starting and growing a business. As you consider applying for a small-business loan, it can be overwhelming trying to understand the entire process — from qualification requirements to the lending process itself. Here’s an easy step-by-step guide that breaks down each aspect of applying for a small-business loan.
Decide Which Type of Loan You Want
There are various kinds of business loans available on the market. Some are exclusively meant for small businesses, while others provide entrepreneurs with a line of credit. So, before you approach a lender, make sure to research the different types of loans that are available and pick one that best suits your needs.
Assess if You Qualify for A Business Loan
If you’re an entrepreneur and want to qualify for a business loan, you’ll need to meet the lender’s eligibility criteria. Here are a few things lenders are likely to look at:
-Your credit score: The higher your credit score, the better the chances of you repaying the loan.
– How long you’ve run your business: Most lenders will need you to have run your business successfully for at least two years, if not longer.
– Your profitability: It’s not enough to have been running your business; lenders also want to know that you’re profitable.
Determine What Payments You Can Afford
Your business is more than just a project for you; it’s an investment you’re making for the future. Staying afloat is only the beginning. A loan will help you to plan and grow your business, but knowing how much you can afford to actually repay on a monthly basis is an essential part of understanding whether or not additional finance makes sense for your company right now. Keep in mind that some lenders require business owners to make a daily repayment, so that’s something you’ll want to keep in mind.
Compare Business Loans
There are a lot of traditional and online lenders out there, and each offers different types of loans. Before you sign on the dotted line, check your options carefully to make sure you’re getting a loan that fits your business needs.