Every business needs help from time to time.
Whether you need help purchasing inventory, leasing a space, hiring employees, or even just consolidating previous company debts, there is funding available.
Of course, not all funding is the same. In many instances, the type of business you run matters just as much as the amount of funding you need.
So how do you find the right loan?
Here are some tips to help you narrow your choices and increase your chances of procuring financing successfully.
Why Do You Need the Money?
When you start looking for financing, the experts agree: it is vitally important that you know exactly how your financing will be spent.
You will find, as you start gathering quotes for small business loans, that the lenders place just as much value on why you want the money as on the amount you’re seeking.
This is important because it will dictate the amount of your ask. It’s fine to have a few ideas in mind, but ultimately the reason you need a “why” is because the answer to “why” you need financing will help you figure out how much you actually need.
Lenders prefer to deal in specifics, so make sure you know exactly why you need the financing as well as how much you need.
How Old Are You?
How long have you been doing business?
Most lenders prefer to work with companies that have been in business for at least a year. This shows that you are dedicated to the product or service that you are providing.
It also proves that your business stands a real chance of surviving. The longer you’ve been in business, more lenders are going to trust you.
This does not mean, however, that you can only get funding once you’ve left the startup stage.
On the contrary!
There are lenders out there who specialize in helping brand new businesses get up and running. If you are relatively new, you’ll want to seek out these lenders and not waste your time with lenders who prefer better-established businesses.
What is Your Revenue Volume?
Many lenders have a threshold that borrowers must meet, in terms of their income. Many lenders are hesitant to lend to companies whose business revenue falls below $50k annually.
The more you bring in, the easier it is going to be to get funding. Like with personal lines of credit, the amount of money your company earns will be seen as an indicator of your ability to repay your debts responsibly.
Debt to income ratio matters here.
How Big is Your Company?
Is your company just you, working out of your garage?
Or do you have a team of people who are dependent upon you for their paychecks and health insurance?
Lenders tend to prefer companies with employees or companies that have become successful enough that the owners need to hire more help (this is why “payroll expenses/new hiring” is an acceptable reason for seeking a small business loan).
Again, if your company is just you (or you and a buddy), there is funding out there–especially if you’re ready to hire an assistant or a few employees.
You might have to do more legwork hunting them down, but they are out there.
What is Your Industry
It is no secret that lenders view certain industries as “risky.” Companies that are arts-based, for example, are often viewed as risky investments.
Technology, on the other hand, is something in which many lenders and investors want to be included. If your industry is one of the shakier or riskier industries, you’ll want to look for lenders that specialize in financing for companies just like yours.
These are lenders who understand the risk of lending to a company whose profits might be highly variable from year to year.
Remember, there are lenders out there who want to work with you. Your job is to find the lender who best fits your needs and style. Take some time with this.
If you rush, you are liable to get sucked into terrible rates and contract terms. Take your time and be thorough. Your business will thank you for it.
Are you looking for a business loan? In the end it can be tricky to navigate the waters on something can be so complicated at times but if you follow the tips you chances of finding what you are looking for go up dramatically.
So what are your thoughts? Share your thoughts, comments, and ideas below.