Business Loans: Finding The Right One
Business loans are not very difficult to come by these days as might be thinking. What with so many governmental and private financial lenders vying with each other for a share of the business loan market, there are brighter chances for businessmen and women to get one provided they have their credit ratings and documents right in place.
Small business persons feel the need for loans when they are short of investment at the time of start-up or when they find their business can do better if financed. Small businesses can approach US Small Business Administration (SBA) for loans tailored for different needs of businesses.
When it is time, you know you cant proceed without financing either the expansion or augmentation of your business. But many conditions and issues need to be addressed critically at this stage.
1. If yours is a start-up, its an uphill task as it is generally deemed that your credit history is still to develop. So much so, lenders perceive you as a risk. Financing most part of it through friends and relatives plus own resources augers well initially by lowered interest burden.
2. If the loan is for working capital, chances are better for you on the following counts. You have a credit history, credit score, possible assets for collateralization and business experience plus ready market/orders.
3. Business expansion loans are based on your projected growth in turnover and profit margins.
4. Loan processing times play crucial roles in choosing loans and lenders. Choosing lenders that take longer may harm your business.
5. A line of credit can suffice working capital needs some times. Here the rate of interest will not burden much as you pay only for the used portion.
6. Nature of the need more or less decides the type and tenure of the loan. For example. Working capital requirement may be taken care off by line of credit; equipment or real estate purchase requires a long term loans (Basic 7 (a) loan-guarantee) etc.
7. Also playing critically here is where you hunt for loans. Grants, SBA guaranteed loans have different interest rates, documentations and processing than private institutions which process faster but have stringent terms and conditions.
Loans benefit by retiring old debts at new, relaxed payment terms because of consolidation. If this is your intention, highlighting the different payables contrasted against each other stands a better chance. Lenders are quick to catch this point as the accrued benefits are in an unambiguous state.
Rather than anything, it is your innovativeness which opens avenues for loans. Rationalizing may even reduce the need from the original loan estimate.