– SBA 7 (A) COMMERCIAL REAL ESTATE LOAN –
- INTEREST RATES FROM 5.75% – 7.50%*
- Loan Amounts From $500,000 – $5,000,000
- 25 Year Loan Term With No Prepayment Penalty
Many people have great business plans but worry about getting the funding to get started. While credit, in general, has tightened since the great recession there are still many loans that are available for small business owners. It takes a bit of research sometimes, but as long as you take the time to look into your options and prepare your information you should be able to find a fit for you. The process can take a little while, so it’s better to get started sooner rather than later. Below are some steps for expanding or starting your business and getting help to finance it.
It is a good idea to explore if you can get a loan before you go through all the hoops of applying for one. The Small Business Development Centers run by the SBA offer free advice to business owners on how to present their plans and help them assess if they are in an excellent position to get a loan. Try also talking with your financial advisor and accountant if you have one to go over recommendations for expanding or opening your business and looking at what type of business loan you need.
If you have run a business in the past or your company has opened already, then that can be helpful information that assists you with getting a loan. If you’ve never run a business or yours hasn’t opened yet it can be a bit more challenging. If your company has opened, then you should assemble documents on your cash flow to demonstrate how your business is earning money and where it is coming and going out. Make sure you prepare a well thought out business plan that reflects your understanding of the process. This should be a concise document that shows your financial projections and a detailed strategy for your businesses success. The key is you need strong documentation, without detailed information, your answer on your loan application will be a no.
One option to consider is to look into Community Banks for a business loan. The loan officers in community banks have more decision-making power. Large banks are tied into algorithms for their decisions and have less flexibility. Search for a bank that promotes their desire to work with small business customers. Consider if their website and their marketing material target small business customers. If a significant portion of their customer base is a small business, then the bank is an excellent choice to explore applying for a loan.
Banks will look at a poor personal credit history as a problem when you are looking into a business loan. They are taking a chance on you, so they want to make sure you are someone that has a robust financial foundation personally. The first step is to get a copy of your credit report. Review your report and dispute any negative information that is incorrect. Work on paying off any outstanding loans or credit cards. If you don’t have enough credit history, you should get a credit card and use it monthly and then pay the bill every month. You can work on improving your credit score by using less of your approved credit, paying your bills on time and not having any inquiries on your credit for a few months.
When you get a business loan, you get the whole amount at once. The loan is used for your stated goal of expanding or opening your business. Once you receive the loan, you will pay it back over a period from your profits of your business. If you have a line of credit, you can use it in the way you might use a credit card, when you need the loan you use it. If you need materials but will have the cash after you finish the job, you can tap into your line of credit. Then you can pay back what you borrowed when the money comes in. A range of credit is better for the day to day running of your business.
If you wait until you are short on cash, you are going to have more difficult time getting money from the bank for a loan. The bank has to feel your business is going to succeed to lend to you. If you are at risk for going out of business, they won’t be able to take that gamble. If you can project your upcoming cash crunch’s that are part of your business flow and explain that to the bank, then they will be more likely to give you credit. Many businesses which are profitable fail because of cash flow issues. Don’t let that happen to you, plan ahead!
Running a Small Business can prove to be challenging. Even though small businesses today constitute the majority of business in the U.S, it is natural to face challenges at the beginning of your venture. One of the most common problems that are faced by small business owners is the lack of financial support. To solve this problem, you can apply for a Small Business Loan. Acquiring such a loan, however, can prove to become a cumbersome and lengthy process if you have not prepared yourself beforehand. In this article, we share some insight into the whole process that will facilitate you into qualifying for the loan you need. Before we discuss the tips, it is important to mention over here that if you are maintaining a start-up and are looking to fund your new business, it is a good idea to apply for a start-up loan instead. If your business lacks sufficient background, it is highly unlikely that you will acquire a small business loan.
Having a good credit score is extremely important when looking to apply for a loan because your credit score directly reflects your ability to pay off debt. Some people have the misunderstanding that when applying for a small business loan, the lender will only be looking at their business’ credit score.
However, in most of the cases, whether the lender is the bank or an online lender, your credit score will be given a lot of importance because the lender is interested in knowing how good you are at managing money and how quickly and efficiently can you pay off the loan in the future. So the first step in making yourself eligible for the loan is to make sure your credit score is good enough. A credit score of about 700 and above is considered to be good and if maintained, can make you qualify to acquire a small business loan.
Maintaining strong documentation is vital to acquire a small business loan because your documents will reflect the standing of your business. Also, whoever the lender is, they will require a list of documents that will convince them of your need to get this loan. Other documents are needed to prove your identity to the lenders.
Basic Borrower factsheet, which includes
This step will allow the lender to analyze the situation of your business assets and your payables. The stronger your assets are, the more convinced the lender will be because it gives the lender something to come after if you fail to repay the loan.
The income statement will give the borrower an idea of revenue generated and the expense created by the business during the past financial year. This document gives them a better picture of where they could expect the business to be in the coming years. It will help them understand whether the business is profitable enough to be invested in or not.
This document will help in analyzing the amount of cash available to the business owners. Strong cash flow indicates liquid assets and can demonstrate a high capability of repayment. By analyzing your current loans, it becomes easy for the lender to determine whether you will be able to pay off your current debts as well as future expected debts in the future with your current status of cash flows.
Along with your financial statements, you are also required to present a detailed business plan to the lender. The lender requires this to understand the viability of your business and your vision. The lenders will need all the details about your business so that they can ensure that the business they are lending to is one that is responsible and highly-structured. Nobody wants to invest in a sinking ship. Hence, it is essential for you to ensure that you have a business plan that brings clarity to the lender and shows a promising future.
Having sufficient collateral is extremely important when applying for a small business loan. Online lenders tend to be lenient about the terms and conditions that are applicable in this regard. However, it is a requirement that has been set by all the lenders and hence is something that you should think of before applying for a loan. You can provide collateral in many ways for example:
Above all, it is essential to have proper knowledge about the loan acquiring process and to make yourself familiar with all the terms and conditions. When applying for a loan, you have many options that you can consider. Whether you use banks, microlenders or online lenders, it is important to be one step ahead at all times and gain all the knowledge you can about the rules and regulations of the particular lender in question. Take care of all the possible hinderances beforehand, which will help you have a complete application and will make you a more suitable candidate for the loan.
In the end
If you wish to make yourself qualify for a small business loan, make sure you keep all four of these things in check. Once you have done everything mentioned in this article, you have nothing to worry about and should feel confident about your approval. We wish you good luck.
Small businesses carry great importance in building the economy of a country. This is because small businesses introduce growth and innovation as well as create jobs in the country. A small business includes any business that has employees that are equal to or less than five hundred in number. This definition has been set by the U.S Small Business Administration (SBA). Some of the small businesses turn into large corporations in the future and hence are seen as carrying considerable potential. Like every other business, small businesses might also find themselves in a situation where they require financial assistance. This could be due to problems faced at the beginning of setting up the business or while running the business. So, you consider taking help from the outside in the form of a small business loan. In this article, we discuss the different steps that you should take before applying for a small business loan.
Before Applying For A Small Business Loan You Must…
The first step of getting a small business loan is first to make it clear to yourself why you are applying for it. The answer to this cannot be as simple as ‘because I need money.’ As a lender, it is essential to understand exactly why they are giving out credit to someone. If you cannot convince the lender why you need the loan, you will not be able to get it.
Hence, before explaining it to the lender, it is a good idea to ask yourself why you need the money. Is it because you want to start your business? Is it because you would like to expand your already existing business? Whatever the reason is, make sure you are fully aware of it and believe in its success.
Along with knowing the reason why you are opting to take out a small business loan it is also important to know what amount you will require fulfilling your purpose. Along with knowing the amount it is also important to figure out the urgency of the loan. If you need the money quick, it is probably not recommended to use the help of banks.
Know the right amount - the more you seek, the more likely you will be rejected.
Be realistic about the way you will be repaying the loan. This needs to be done beforehand so that you can choose the repayment plan that is in line with your financial expectations. Do not overestimate your ability to pay back the loan as it could hurt you in the future. Make sure whatever repayment plan you have in mind, is practical and affordable to you.
Regardless of the kind of lender you end up with, it is natural for the lender to ask for some collateral when giving you a loan. This makes the lender feel secure and increases their confidence in you. Collateral doesn’t necessarily have to be in the form of an asset. It could be in the form of guarantees as well. Before starting the application process, it is wise to decide on the kind of collateral you will be provided to the lender to get the loan successfully. This is imperative because you might end up getting rejected if you do not have sufficient collateral.
Some of the lenders waive off the requirement of having to present collateral however this exposes you to a number of risks such as loss of your valuables or other items in case you fail to pay the lender. Do a thorough analysis of the assets that you have and then decide what collateral you can present to the lender. Good collateral increases the probability of you getting accepted for the loan.
If you are opening up your business and need funds to initiate the business, it might be a good idea to consider a start-up loan. You can do more research online to find out which loan would be best suitable for your needs. Also, at every step, make sure you are eligible for whatever you are considering.For already existing businesses it is a good idea to consider a small business loan. For a small business loan, it is a good idea to make SBA Loans the first option that you consider.
This is because SBA Loans also have the option to opt for low-interest rates and repayment plans that are flexible. The other options that you have are micro lenders or online lenders. If you have a good credit history, can offer sufficient collateral and do not need the money immediately, you should consider going to the bank for your loan. On the other hand, if you do not have a lot of time on your hands and do not have sufficient collateral either, it is better to go with online lenders since they are known to be flexible.
Once you have finalized the main elements of your decision such as the type of loan and lender, the next step is to consider many options in the same category. Check out the terms and conditions of the options that you are considering and the annual percentage rate. Again, make sure that the repayment plan sounds affordable and doable to you.
Discuss with the lender how flexible the terms are and what would be the repercussions if you fail to make a payment. Communicate all your concerns and worries and do not hesitate to ask questions. Every lender has their own set of rules and terms. Make sure you both are on the same page and discuss even the smallest of details regarding your case.
Lear the annual percentage rate (APR) of the loan. Know what the fees will be, as well as any prepayment penalties.
The application process for getting a small business loan could become lengthy if you do not know what to expect and which documents to prepare. So it is a good idea to make a list of all the documents that will be required by the lender and gather them beforehand. The lenders will require you to show several documents that could pertain to any nature such as financial or legal. Hence, to make the whole process as short as possible keep the necessary items ready.
Getting a loan can be tricky. By getting your hopes too high, you might invite yourself to disappointment. Understand that rejection is a part of the process, and one or two rejections do not necessarily reflect your inability to acquire a loan. Whenever you are rejected by a particular lender make sure you find out what your case was lacking and make a stronger case in front of the next lender. By doing this, rejection will serve to be a learning process that you can use to acquire the loan you need.
If you are looking to acquire a small business loan, make sure you incorporate all these tips to prepare yourself better for the process of getting a loan.