5.2 million loans were given to small businesses in 2014, according to the U.S. Small Business Administration.
Small businesses run by people like you, who want to open a storefront, buy supplies, or lease a space. Before you take your first step towards owning your own business there are a few things you should keep in mind.
Here are five things you should know before applying for a business loan.
1. What is Your Credit Score?
As you start to search for how to take out a business loan, you will notice a minimum credit score requirement.
If you already own a business, you should check to see what your business score is. This is usually determined by how much you owe on your business cards, how often you pay your bills on time, and other factors.
For first-time loan seekers, you will want to check your score before you apply. If you have a score of 700 or above, you’re in good shape! If you aren’t you need to see what is keeping your score low and try to pay off any outstanding bills or fees to get your score to a 700 or above.
2. How Much Do You Need?
Your credit score is where you need it to be and now you need to determine a dollar amount. How much money will you need to start and maintain your business until you are able to stabilize?
Take everything into consideration — rent, bills, utilities, product, employees, and transportation. Once you create a budget and have an amount in mind that you will need, proceed to the bargaining table.
3. Consider Your Options
When taking out a business loan you should know that not every loan is alike. There are subsets of loans meant for specific industries or loans that cover only certain costs and materials.
An example of this would be online business owners. You will not need the same type of loan as someone who wants to open a store. Dealstruck would be a great place for people who want to sell online.
Look into your options before you settle.
4. What Are the Details?
Did you read the fine print? Know what your interest rate is, how much time you have to pay the loan back, and other small details?
Each lender will have different requirements for you to pay back your loan. Know what those requirements are, what will happen if you miss a payment, what happens if you default, and if your loan is able to be consolidated.
When you fill out the application for a business loan check those details and the read through everything before you sign.
5. Payment Plan and Goals
Set your own goals to pay back your loan. Give yourself a rigid schedule with set amounts to pay it off in time and get your business out of debt.
Try to set quarterly profit goals for your business and keep a close eye on your budget. Don’t spend what you don’t have and be sure to allocate your loan appropriately. In doing all these things your business will thrive.
Applying for a Business Loan
Follow these tips before you begin applying for a business loan. There will be dozens of options so give yourself time to look them over before making a decision.