One of the challenges with securing a loan for a small business is that there are many options out there, so it can be tricky to know what is right for you. The guide below can help you understand how business loans work and what to consider.
Before Applying for a Loan
There are certain things you will need to consider before approaching the lender. For instance, what is the purpose of taking out the loan? Is it to expand your business, increase your team, or improve your products or services? Also, note that lenders will consider things like credit score, annual revenue, years in business, and your ability to make payments before giving you a loan. The next thing you have to think about is the specific amount of money you need to achieve the purpose of the loan. Always make sure that you are taking an amount your business can payback.
Types of Lenders
Here are the types of lenders you can get a business loan from.
• Traditional banks
• Credit unions
• Financial companies
• Merchant cash advances
• From friends and family
Types of Small Business Loans
There are different types of loans an entrepreneur can consider. For instance, equipment financing loans can help you purchase equipment needed for your business, while SBA loans are backed by the government, and you can use them for a variety of purposes. Other types of loans include asset-based loans, small business lines of credit, invoice factoring, merchant cash advance, and small business term loans. Before you apply for any of these loans, understand the terms and whether they serve your purpose.
How to Apply for a Loan
While most people find the process of applying for a loan daunting, it can be straightforward as long as you have all the right documents in place. You will need a business plan, bank and financial statements, tax returns, and your employer identification number (EIN).
After gathering all your documents, do not be tempted to apply from multiple lenders to increase your chances of getting a loan. Choose a lender carefully based on your needs and apply. If it does not go through, you can move on to the next lender.
At 18 Sierra Financial, we make the process of applying for a business loan as straightforward as possible. Give us a call today, and we can help secure a loan to keep growing your business.