Introduction

You've finally built up the courage to start a business. You've taken the first steps, and now you're ready to make it happen. Whether you want to buy equipment or finance a major renovation, there are many ways to fund your needs—and depending on your situation and needs, one type of loan may be better than another. In this post we'll take you through 10 easy steps for finding small business loans for whatever you need.

7 Tips To Get A Small Business Loan

• Fill out an application

• Show you are credit worthy

• Provide a business plan that shows how you will pay back the loan

• Show your credit score is either good or excellent

• Demonstrate that the business has adequate cash flow to pay back the loan

• Show you have enough cash to pay back the loan

• Have a collateral plan that proves you can get the loan back

What is a Small Business Loan?

A small business loan is a type of financing that can be used by companies to help grow their businesses. To get a small business loan, you must be considered a small business in the eyes of your lender. To be considered a small business, you need to have less than 500 employees. If you're thinking this sounds like too many people for one company, it's because it is!

Another thing that makes you ineligible for most loans as an individual is whether or not your company has been incorporated (become official). With incorporation comes bureaucracy and red tape—not exactly what most entrepreneurs want when they start out. In other words: if your company hasn't incorporated yet but wants to get some funding from investors or banks, don't worry about incorporating yet! You'll still have plenty of time before having to do so; however if at least until then there won't be any issues with these types of lenders giving loans out without being involved with bigger institutions such as corporations or franchises.

What kind of small business loan do you need?

At this point, you have a general idea of how much money you need and what your loan purpose is. Now it’s time to get down to the nitty-gritty details:

• Loan amount: This is the total amount of money that you want to borrow.
  

• Loan purpose: Whether it’s for equipment acquisition, working capital or another reason, make sure that this fits into your overall plan for your business.
  

• Loan term: How long will it take for you to pay back the loan? Your bank or credit union may require certain maturity dates when they set up their repayment schedule and determine interest rates on those loans (more on that later). Be sure that any terms are compatible with what works best for both parties involved—that way neither party has an incentive not to repay their debts in full by their agreed upon due date(s).
  

• Loan repayment schedule: How often do monthly payments come due? Is there a balloon payment at some point during the term? The more information about each payment cycle shared upfront with potential creditors can help prevent misunderstandings later down the line when unexpected charges show up on monthly statements coming from lenders who did not disclose such details beforehand because they were only interested in getting as much business from customers as possible without regard for customer satisfaction after sales were made initially . . . which brings us right back around again!"

How much will it cost to get a Small Business Loan?

The interest rate is typically a percentage of your outstanding balance. It’s calculated on a daily basis and can fluctuate depending on market conditions, the loan term and other factors. Fees can be charged when you apply for or close out your loan. They might also incur during the life of your loan if you make late payments or default on it.

• Application fees — When you apply for a small business loan, there may be an application fee required by each lender you work with. This can range from $100 to $500 per application depending on the size of your business and how much money you are asking for; some banks waive this fee altogether if they approve you as a customer at their bank branch (i.e., they don’t send an employee out in person).
  

• Processing fees — Some lenders will charge processing fees when they receive all of their paperwork back from applicants after reviewing it thoroughly enough that they feel comfortable approving someone's request for funds (i.e., no more questions left unanswered). These costs could range anywhere between $150-$300 depending upon what type of credit score(s) were used during this step along with whether any additional requirements need addressing before making any decisions about granting funds - such as completing financial literacy training courses first!

Determine the type of lender that best meets your needs

Deciding which type of lender is best for your situation is one of the most important steps in the process. While each lender has its own requirements and stipulations, there are some basic questions you can ask yourself to help determine who will be able to offer you the best loan terms.

First, do you have good credit? If so, then it's likely that you can qualify for low-interest rates or even better interest rates if your business is strong and profitable. If not, there may still be lenders who will help fund your small business but they're more likely going to charge higher interest rates because they're taking on additional risk by lending money without being able to verify income or assets like other types of loans do.

It's also important to consider how much cash flow comes in on a monthly basis and how long it would take until those funds are available again after repaying the loan (this could be anywhere from two weeks to six months depending on how often a business pays its employees). This way lenders know whether or not their investment will pay off quickly enough before deciding whether or not they want any part of it—and if so then what kind!

Is your credit score high enough for a Small Business Loan?

When working to get a small business loan, you will be asked for your credit score. This is an important number that influences whether or not you can get a loan and what the interest rate will be.

Your credit score is calculated by the 3 major bureaus, Experian, Equifax & TransUnion (well there are more, but we won't get into that...), and it's based on your history of paying bills and loans on time. The higher your score, the better chance you have at being approved for loans and getting lower interest rates.

If you are applying for a personal loan, startup business loan, small business loan, or anything in that topic through your bank's website or branch location, they may ask for this information right away as part of their application process. If this happens, just make sure to double check with them that the request was received before checking out; otherwise they may think that something went wrong when actually nothing did!

Do you have cash flow to make loan payments for the loan?

To get a small business loan, you first need to understand the concept of cash flow. Cash flow is simply the difference between your income and expenses. It's the lifeblood of your business—without it, you will not survive.

If you're losing money on a regular basis, then you have negative cash flow and likely cannot afford any new loans or investments into your company (beyond the bare minimum). This means that if your landlord demands rent by Friday and you don't have it—you're going to end up homeless!

How long do you need to repay the loan?

Repayment terms are usually flexible, but you should take time to consider how long your loan will last and how much money you'll need to make each month.

The length of a small business loan can range anywhere from two to seven years, but the average term length is between four and five years. It's important to consider where your business is at in its lifecycle when determining this number, as well as how much cash flow you have available for repayment. Once again, if things go poorly during the first few years of operation when cash flow tends to be low or nonexistent while expenses remain high (like payroll), having too long of a repayment period could put undue strain on solvency. On the other hand, if sales exceed expectations over those same few years and profits are high enough that all expenses can be covered before payments come due with no problem at all (such as in cases where clients pay up front), then extending repayment terms may allow for more flexibility than otherwise possible with shorter-term loans or lines of credit (LOC).

Consider the collateral required for a business loan.

When you apply for a business loan, the lender will ask if you have collateral. They'll want to know that if you fail to pay back the loan, they can seize your property and sell it to recoup their loss. Collateral is usually in the form of real estate and vehicles owned by the borrower. It can also be other personal or business assets such as stocks and bonds, or even inventory items like equipment or tools used at a job site.

If you have collateral, it's usually a good idea to use it as security for your loan. The lender will want to know the value of your property so that if there is any discrepancy between the amount owed on the loan and the value of the collateral, they will be able to make up the difference from their own pockets.

How flexible is your lender on payment terms?

When you're applying for a small business loan, you may be surprised to learn that the bank or lender can actually dictate how much money is coming in and when. While it's true that most lenders are flexible with payment terms, there are some things they won't budge on—and those things matter more than you think.

Payment terms refer to how often your business pays its monthly installments, as well as how much time elapses between each installment. For example, if your payment term is $500 per month paid every two weeks (or bi-weekly), then this means that $500 will come out of your account every other week until the balance of the loan has been paid off. If your payment term is quarterly (paid every three months) then it will take three months for one full payment cycle; if it's annually (paid once per year), then it'll take twelve months for one full round trip through all 12 payments.

It may take time to find the right lender.

It may take time to find the right lender that you need. You need to find a lender that is right for your business and your financial situation, but it's not always easy to do so. You may have to shop around a bit, or even talk to several lenders before you find the right fit.

It's important not only that you choose a lender who will approve you and give your small business loan request as much consideration as possible, but also one who understands the needs of small businesses like yours and has experience working with them.

Conclusion

The process of applying for a loan can be slow and frustrating. However, if you are committed to your business, then it is well worth the effort! If you keep these tips in mind when looking for financing, then hopefully they will help shorten your search time. Get your loan today!