You never know the critical role of business loans until your company falls between a rock and a hard place, and an injection of funding is your only haven.
And of course, no one wants to plunge into a debt cycle in the name of saving their business. So you want to use some sure sources of commercial funding— loan products that can help drive success.
Proper preparation is the key. Hurried borrowing can lead to business-threatening debt traps.
And here’s the catch; if you (the borrower) can make a higher return on the lender’s loan fees, then the product is a fair deal and a promising recovery or growth opportunity
Here’s everything to learn about preparing to secure business financing.
- Know Why You’re Borrowing
Business funding is a double-edged sword that can either ruin or make your company’s future.
Don’t rush to send a loan request. Seek to borrow wisely, depending on your present circumstances.
The following retail situations can warrant the need for financial backing;
- Working capital
- Buying inventory
- Taking care of business emergencies
- Purchasing retail equipment
- Funding growth opportunities
- Taking over another company
- Acquiring a fleet of business vehicles
- Securing a business premise
Planning upfront for the finances you borrow can help you decide on the right sources. For instance, merchant cash advances are an excellent way to take care of business emergencies.
- Weigh your Capability
Business credit ratings and your personal credit score are a standard way to weigh your capability.
While traditional lenders prioritize credit ratings and collateral, many alternative lenders prioritize other stuff. For instance, MCA providers base their funding approvals and caps on a business’s credit card processing history.
- Which Loan Product & from Where?
Business loan products vary mainly by purpose, repayment terms, interests and fees, collateralized and non-collateralized types, etc.
Below is a list of funding products to study and rely on in your future applications.
- Term loans
- SBA loans
- Business lines of credit
- Mortgage or Real estate Financing
- Invoice Factoring
- Merchant cash advance
Business owners must familiarize themselves with the intricacies of each loan product before embarking on application.
Your choice of business loan also determines where you borrow from. Merchants can search from the following sources;
- Your financial or payment service provider
- Banks & credit unions
- Alternative online lenders
- Person-to-person financiers
Searching in the right place can ensure you get the best loan product for your specific needs.
- Organize Your Paperwork
Below are some must-have documents in many application procedures.
- Proof of Identity, like a driver’s license
- Business Plan or Articles of incorporation
- Business description and specific industry
- Business permits & licenses
- Business & Personal Bank Statements
- Business & Personal income tax returns
- Personal & Business
- Financial documents like your business balance sheet, Profit & Loss records, and cash flow records.
Requirements may vary by lender, but most of them will likely request the above credentials. Confirm your would-be lender’s needs upfront.