Majority of a country’s revenue comes from small businesses. Despite this fact, SME entrepreneurs face the maximum complications while getting loans for business start up. Oftentimes, they are humiliated badly when submitting application for the same. However, the tight rules set by banks for lending loans have to be followed.
So, what to do for obtaining it in a hassle-free way? Follow the tips shared below to get small business loan quickly.
Determine Why You Want the Loan:
‘Why do you need the loan?’- This is the first question your lenders going to ask. So, get prepared for the answer before approaching. Explain your reason of applying for the loan clearly. You may say them that you want to expand your business or are intended to start a business of your own.
Picking the Right Lender:
Opt for cash advance to get loans fast. You can also pick other alternative available lending products. On the other hand, if your preference is getting loans at the lowest possible rate of interest, then loans of conventional bank or SBA loan may be your answer. But, if speed is not an issue with you, then SBA loan is a good option. Once you choose your financing vehicle, compare the options on the basis of annual rate of percentage. Always go with one offering the lowest APR. However, the lowest APRs are good as long as you can pay the loans regularly.
Select the Loan Type:
Your need for loan will determine its type. Getting loan in the first year is quite tough for those who have budding enterprises. Obtaining regular repayment of the loan from the taker is essential for the lender to make the cash flow. Hence, they disqualify start ups from financing. However, in that case, non-profit lenders may help you with micro or personal loans. If you’re planning to expand your business by shifting your office, consider applying for business expansion loans. Here, you’ll get the loan for the period you’re going to use the product.
Calculate Your Monthly Payment:
Make sure your monthly loan repayment is not creating financial burden on you. Figure out your monthly payment by using the business loan calculator available online.
When to Avail Bank’s Service:
Taking loans from banks is a good option when you have good credit score. Generally, banks choose to give loans for business start up to those providing collateral. Options in traditional banks are inclusive of refinance, credit lines, and term loans. The Small Business Administration of the US give loans through its banks by executing short-term micro-loans, disaster loans, and 7(a) loan programme. Mostly, the SBA loans range somewhere between $5000 to $5 million.
When to Contact Micro-lenders:
Micro-lenders give loans on a short-term basis that is mostly less than $35, 000. However, the APR are high when you compare it with the banks. While submitting application for getting such loans, explain your business plan in detail in it. Also, mention what made you applying for the loan. All these formalities make the process time-consuming. If you fail to qualify to get loans from banks, the micro-lenders come as a rescuer.
Meeting the Eligibility Criteria:
Even after following all the above-said steps, you may fail to qualify for the loan. So, where have you committed the mistake? Mind your credit score. Your credit spectrum is crucial in deciding which loan you can take. Three renowned names, TransUnion, Experian, and Equifax are there to generate your credit report absolutely free. The credit card report is given annually to the customers. Contact issuers of credit card to get free FICO score.
Collect Your Documents:
After checking whether you’re eligible for loan, collect the required documents. Without affecting your personal credit card score in any way, you can submit applications for obtaining multiple loans for short-term periods. The requirements of the documents vary from one lender to another.
Important documents you should start to gather are:
- Documents of personal and business tax returns
- Personal and business bank account statements
- Financial statements of your business transaction
- Legal papers related to your business such as incorporation article, franchise agreement, and agreement of commercial lease.
Learn from Your Mistake:
Many lenders are ready to give you loans, irrespective of the purpose. From them, if someone rejects you, don’t get frustrated. Rather, ask directly why he has rejected you. Once you know where you have done the blunder, you’ll be cautious about it next time you are visiting another lender for the same.
Whenever you need to get loan, all you have to do is to know where you should visit. Understanding the requirements of different kinds of business loans also will help you in the long run.