Small Business Financial Article
|Rich Best has spent 28 years in the financial services industry, as an advisor, a managing partner, directors of training and marketing, and now as a consultant to the industry. Rich has written extensively on a broad range of personal finance topics and is published on several top financial sites. Recent books include The American Family Survival Bible and Annuity Facts Revealed: What You MUST Know Before You Invest.|
How to Get Approved for a Business Loan
Things are looking up for businesses that are ready to expand and that are in need of financing. And, with interest rates hovering near their historic lows, now may be the best opportunity to lower your overall financing costs. If your business is need of working capital for expansion, acquisitions, equipment purchases, or simply to meet growing operating expenses, it would be worthwhile to review the different types of business loans we’re offering our business customers today.
Although banks have become more active in small business lending in recent years, it can still be difficult for many small businesses to qualify for a loan. Most banks require some form of collateral, which can be an obstacle for small businesses that don’t have assets or business owners who don’t want to risk their personal assets. As a result, many small businesses are turning to online lenders because most don’t require collateral. While it may be easier to qualify for a loan with an online lender, businesses can expect to pay higher loan costs because of it.
The main concern for any lender is whether you have the financial capacity to repay the loan. For a business, that capacity is demonstrated by the strength of its cash flow. Bank lenders want to see at least a three-year history of cash flow growth and a projection of future cash flow. Banks typically want to see a full scale business plan that details how you plan to achieve your cash flow projections.
For the best terms on a bank loan, your business should have a solid credit history. If your business has yet to build its own credit history, bank lenders will rely on your personal credit score. A score below 680 will probably disqualify you for a loan. The better your credit score, the more favorable loan terms you can qualify for. In either case, you should hold off applying for a business loan until you have taken every possible step to raise your credit score.
To increase your chances of getting a loan, you should look for lenders who understand your business and industry. If they can see that you have deep industry knowledge and a sound plan for making money, they may be more willing to take a chance on your business. Online lenders utilize a sophisticated data base of market information to determine the prospects for a business.
Don’t Wait Until You Actually Need It
Most businesses need financing at some point, so business owners should plan well ahead of anticipated needs. The worst time to look for a loan is when your business actually needs it. A good business plan anticipates the need for financing. The time to build a relationship with a bank is not when you need a loan. Banks are always interested in building new relationships with business owners. Not only can they be a source of capital in the future; they can be a valuable source of advice and networking.
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