Many entrepreneurs have had to apply for a loan at one time or another. Applying for a business loan from a traditional source can involve a lot of steps. Some of the steps that are often overlooked are a reflection of your business’ needs and finances. The process of acquiring a loan can go smoother if you are prepared. The following are a few key questions to ask before applying for a loan.
Will I Qualify for the Loan?
Before applying for a loan, ask lending institutions about their requirements. Most will let you know the credit score necessary to be approved, the cash flow desired, and other qualifying factors. Remember if you apply for a loan and don’t receive it, this rejection can hurt your credit.
What is the Loan Amount?
Before you ask for any money, make sure that the loan amount desired meets your business’ needs and isn’t too much. The best way to know the accurate amount is to make a monthly cash-flow projection.
Can I Repay the loan?
You will be asked to provide financial projections from potential lenders. Banks will want to make sure that your cash flow will be enough to repay the loan. In some cases, you may have to show that your cash flow is three times the debt payment requirement.
How Good Are My Finances?
It is important to know both your personal and business score. You can find your business score through Equifax, Experian, or Transunion. Also ensure your personal finances are in order. Some lenders may look at financial information such as mortgage payments, credit card debt, student loans etc.
Is There a Prepayment Penalty?
Unfortunately, some loans penalize you for paying them off early. In some states, lenders can charge prepayment penalties but these can often be negotiated. Prepayment can be advantageous if you plan on expanding your business and need a larger line of credit. Other lenders could see prepayment as an indicator that you will repay their loan.
FAM provides premium customer financing to merchants. We have a variety of lending programs designed to offer fast, efficient loans to jump start businesses or keep them afloat. FAM has a high approval rates because we offer loans based on performance, not credit.