Small Business Loans Still Available – 2022-06-17 00:00:00 2022-09-16 00:00:00 https:///r/covid-19/small-business-loans/ COVID-19 Slovenia Securing small business loans can unlock growth for you are the company. This guide will help you understand the financing options available and the information you need to apply for a loan. https:///oidam/intuit/sbseg/en_us/Blog/Graphic/small-business-loan-header-image-us-en.jpg https://https:///r/covid-19/small-business -loan / How to get a small business loan: Guide and tips |
If your existing or newly formed small business needs working capital, but securing investors, personal loans or small business grants is not an option, a business loan may be the best route.
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Business financing can be a long and confusing process. But rest assured, these lines will help you understand the process and the information you need to gather when you want to apply for a business loan.
Business Loan Guide: All About Small Business Loans
In this article, you’ll learn how to get a small business loan, the different types you can qualify for, and how to choose the right one for you.
There are several types of small business loans available, including small business administration loans, traditional loans, business lines of credit, invoice factoring, and specialty loans. Explore the different options below to see what might be the best loan for your small business.
SBA loans are funded by small business lenders but guaranteed by the US federal government. The most common loan of this type is the SBA 7(a) loan. Because the federal government backs the loan on behalf of your business, your small business is more likely to be approved than if you went directly to the lender. SBA loans range from $500 to $5.5 million.
You can apply for traditional business loans directly through lending banks and financial institutions. The amount of bank loan depends on the requirements of the traditional lender, the size of the lender, and the industry, size and history of your business.
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A business line of credit is similar to a loan when you ask for access to a certain amount of money. Once approved, you have access to the funds. Unlike a loan, however, a business line of credit allows you to withdraw only the amount of cash you need and only pay interest on the amount of money.
While not technically considered a business loan, using your business’s outstanding accounts receivable can be a way to access short-term financing when you need cash. There are several options when using your accounts receivable to access financing.
Invoice factoring is a business practice where your company sells your accounts receivable to a third party (a factoring company). Direct factoring companies pay your company a large percentage of the invoice amount (often 80-90%).
Your customer then pays the invoice amount to the factoring company based on the invoice payment term (such as 30 days, 45 days or 60 days). After your customer pays the invoice amount to the factoring company, the factoring company pays your company the balance of the invoice, minus the factoring company’s commission.
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Accounts receivable financing is a similar but slightly different form of financing where your business retains ownership of your invoices but uses them as collateral to access financing. In an account finance agreement, you may be offered finance equal to the amount of the account you are financing, minus the fees paid by the lender. offers access to advance bill financing Get paid through payments so you can see your money sooner and get the money you need to keep your business going.
Special small business loan programs support specific groups or goals. For example, the SBA’s Office of Women Business Ownership and the Women’s Business Center help women business owners find loans. USDA helps rural small business owners secure loans. The Accion Opportunity Fund makes loans to black entrepreneurs, women and immigrants.
Before applying for a small business loan, there are a few considerations to keep in mind so that you are prepared. Here are some of the eligibility requirements that many small business loans require:
Credit history is the borrower’s record of debt payments. Just like your personal credit score, your business has a credit score. Typically, lenders review your business credit history, but if you are a new business, lenders may ask for your personal credit history.
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In this case, make sure you understand what your personal liability is when the lender asks to check your personal credit history. If you sign up for a business loan, you are personally responsible for your company’s debts.
Usually, business loan providers prefer a credit score of around 680 and above. If you are on the lower end of the spectrum, you may need strong business credentials as proof, such as high annual revenue and years of business.
Your business history is a brief description of your business and its financial results. Prepare at least five years of financial statements with the bank if you have been in business for that long. Lenders look at your history to predict the future. They want answers to questions like:
Your presentation to the lender should specifically discuss how you will use the funds and how your business will repay the loan.
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For example, they want to hear that you will hire a software developer with a loan and that the application built by the developer will start generating revenue within six months of the hire. They don’t care about the software itself – just that the software will enable your business to pay interest over the life of the loan.
Finally, lenders need a clear understanding of your business insurance. If you are taking out a loan, the lender needs to know how they will repay the money they loaned to you.
Because the value of business assets such as equipment, inventory, and accounts receivable changes over the course of the business, many lenders require some type of collateral to complete a loan.
If you do not have collateral, the lender may require another borrower with adequate collateral to co-sign or guarantee the loan. Lenders need to check that your business has the means to secure the loan, so make sure you understand the collateral requirements.
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Getting a loan for your small business may seem daunting, but it will be easier if you are prepared for the application process. Here’s how to get a small business loan in six easy steps.
It may seem obvious that you should determine how much money you need for your business before you look for a loan, but don’t skip this step for three reasons:
Before jumping into debt, consider other options. Is it better for your business to add additional owners in exchange for equity?
Is it possible to outsource the work to a freelancer instead of taking a loan to an additional senior employee and avoid the need for a loan? In other words, make sure the loan is right for your business before you commit to a debt financing strategy.
How Many Types Of Small Business Loans Are There?
As mentioned above, there are many loan options for your business, but how do you know which one is right for you? Review each loan and consider the following factors to determine the right fit for your business:
Once you have decided on the type of loan for your business, find the right lender. During this process, think of your company as a customer. Shop around. Play one lender against another and find the best deal.
Because lenders earn interest when it comes to small business financing, they may not offer you their best interest rates when you start. Don’t let it hold you back. Push it again. Tell the lender that you are shopping the rates and terms against competitors.
Be careful when shopping with lenders: If you allow a lender to check your credit score, the check will appear on your credit report. You don’t want your credit score to be checked frequently in a short period of time. Get as much detail as possible from potential lenders before letting them check your credit score.
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Once you have narrowed down your list of lenders, make sure you understand their requirements before applying. For example, most lenders require collateral to secure the loan.
In the legal documents you fill out to complete the loan, you will offer your business insurance as backup. If you default on the loan, the lender has the right to seize your collateral and then sell the collateral to pay off the loan.
In the event that the lender is not satisfied with your business insurance, they may require you to find a co-signer with better insurance. In this case, you want to find a co-signer before the loan documents are ready to be signed.
Learn about minimum collateral values and other loan requirements early in the process. Give yourself time to determine what risk you are willing to take to secure your loan.
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The documents required to secure a loan vary from lender to lender and based on your business history. Some of these documents include:
If your business has enough cash to cover the entire loan, you may not need more than a balance sheet and some recent financials. However, the fact that you are considering a loan probably means you
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