When running a business, there are a few challenges that you may come up against, finance being one of the most common. Many businesses, especially smaller companies, may find it difficult to find the funds to help them succeed.
This is where loans for small businesses come in. These loans can be used to finance growth, allow you to diversify and develop new products, or hire new employees to help set your business on the path to success. Read on as we take a look at the steps you’ll need to take when applying for a business loan.
Consider loan requirements
Before you begin your application, you’re going to need to consider the type of loan you’re looking for, and the amount you’re hoping to receive. Think about the amount of cash you need – would you benefit from a small business loan from your bank so you can take advantage of a larger amount? Or do you need a smaller amount from an online lender to improve your business? Try to determine exactly how much you need to borrow, as this will help you narrow down a lender. Make sure you only borrow as much as you need, applying for a larger loan may make it more difficult for you to pay back.
Research and compare lenders
Once you’ve determined how much you’d like to borrow, the next step is to find a lender that is suitable for you. To do this, you can use comparison tools online that will show you interest rates and fees offered by a variety of lenders. You could even compare other types of lenders like credit unions and government-backed loan programmes to ensure you’re getting the best deal. Make sure you read reviews and feedback on your chosen lender to get a clear and non-biased idea of the service they provide. This is useful for avoiding predatory lending practices.
When you’ve decided on a lender, it’s time to start gathering your documents to help you throughout the application process. There are a range of documents you may be asked for, so being prepared means you can complete your application smoothly and benefit from fast approval rates. Some of the documents your lender may ask for include a business plan.
This outlines your business, your goals, and your projections, and gives your lender an idea of how you plan to use your money, and how likely you are to be able to pay it back. You may also need financial statements and tax returns to help you throughout the process, although this may vary depending on your lender.
When you’ve identified a lender that works for you, and you’ve gathered your documents, it’s time to apply for the loan. If you’re applying for a small business loan with a traditional lender, this might mean a trip to the bank.
If you’re applying for a small business loan online, you can complete your application easily without having to leave the house. Applying online also allows you to track your application from beginning to end. Once your application is complete, the approval time will depend on your lender – this could be from a few hours to a few days, or even a few weeks depending on the loan you’re applying for.
If your loan is approved, your lender will provide you with the terms, like interest rates, repayment terms, and any additional fees. It’s essential that you review these terms in-depth and decide whether they suit you. Don’t forget – you can always negotiate terms with your lender if you need to.
Sign your agreement
Once you’ve reviewed your terms and decided to go ahead with the loan, your lender will send you an agreement to sign. This agreement will stand as a legally binding contract that gives an overview of the loan amount, interest rates, repayment terms and other important details that may be necessary to include, for example, additional fees. Once you’ve signed on the dotted line, your lender can then transfer your funds.
This can happen shortly after you’ve signed your agreement and sent it back to your lender. The lender will deposit your money in your business account and then you will be free to use it as you wish. You should make sure that you only use your loan as you had planned, and make sure you have a repayment schedule in place to ensure you repay your lender in full and on time.