What you Need to Know About Small Business Loans
In today’s market, small businesses often bear the brunt of a weak economy and frugal clients. It is not uncommon for small businesses or start-ups to find themselves facing financial problems and will need to turn to banks or lenders in a bid to prevent closing its doors. But often, these businesses can find themselves shut out when they attempt to obtain a small business loan . While many lenders make obtaining a loan easy, the general rule of thumb is that banks are pretty strict when it comes to loan criteria. Still, there are many ways to improve your chances of being successful.
Before you apply for a small business loan, you might want to consider:
Put yourself in the lender’s shoes – Think long and hard about why you think a bank would want to lend you money. When applying for any loan, you should treat it as if you are applying for a job, but instead of an impressive CV, you will need a sterling application. This includes understanding your credit record, financial situation and what you can use as collateral. In addition, you must consider cash flow, revenue and credit quality before approaching your lender.
Decide how much you need before the time – It is important to stick to the amount you need when applying for a small business loan. Many businesses and even individuals will apply for more money than they really need, and this opens the door to unnecessary debt. Also, the more you seek, the more likely you will be rejected.
Learn from the past – If a lender rejects you, try to figure out why, or better yet, ask. Lenders will likely tell you the reason you have been rejected, which means you can go back and work on the issue before approaching a new lender.
Use receivables as collateral – If your business has a bad credit history, but you have receivables, you can use this as collateral to improve your chances of loan approval. Alternative lenders may be more relaxed but charge higher interest rates, which is something you should consider beforehand.
Do some research – Know what you are getting into before you approach lenders looking for a small business loan. That means learning the annual percentage rate as well as standard interest rates, so you know whether it is a good deal or not. Different lenders such as Merchant Money – www.merchantmoney.co.uk, will offer different rates, so it goes without saying that the lower the charges, the more you get out of the deal. Know what the fees will be and if there are any early repayment penalties etc. so you can make the most informed decision.