If you already have a company, you know that maintaining a healthy cash flow is one of your main activities. When you are in a jam or you need money to expand or modernize your business, you need options.
One of those alternatives could be a business loan. But you have to make sure that you look for the best small business loans, which will be the ones that meet the specific needs of your project. During this search, you may come across:
- Short term loans: To get money fast when you face sensitive matters.
- Business lines of credit: This is an open line of credit you can use whenever you need it.
- Business credit cards: To buy things for your operation, from a CRM license to a showroom inventory. Many come with business-category discounts and reward programs, but a recent study from J.D. Power revealed that 25% of small business customers are spending less with their cards since Covid-19.
- Equipment and leasing: To help your business infrastructure either a tractor, a delivery car, or office desks.
- Accounts receivable: To transfer unpaid invoices to a financial institution while you get the money to stay on business.
All in all, these options have a lot of things in common. For example a fast response, a business focus, and a short to medium term that can help you boost your business without staying in debt for years.
4 things you need to look for
Every financial product in every financial institution has its own conditions. Yet, there are things you need to take into account when you are choosing the best small business loans.
When it comes to factoring or accounts receivable, your personal credit score won’t come into the equation. But in most cases, having a healthy score will ensure you a better deal. Either for approval or for rates, the higher the score, the better the terms of the deal.
Every time you borrow money you have to pay interest rates. There is no escape. Why? First, rates are basically the cost of the money, and second, financial institutions need to continue their business even when they lend you some of their money.
Normally, business loans have rates between 2% to 13%. Some financial products may be different, with up 100% of rates. That’s why finding the right one for you must be part of your research. Just remember to take into account the rates, the amount of money you actually need, and the time you’ll be paying it so you can choose the best (or cheapest) one.
Use of the money
A business loan has to be destined only for related things. That means that you can’t pay tuition or go to the beach with that money. In order to approve your request, most financial institutions will ask you to present a business plan or, at the very least, a business strategy for that money that includes financial projections.
Have papers ready
When you apply for a business loan, you’ll need to present a lot of documents. This is the way financial institutions evaluate if they should give you the money or not. First, you need to have a perfectly written business plan, financial projections, your latest tax returns, your bookkeeping in order, and even the ownership documents in case you are asked for collateral. That means a house or if you are applying for an equipment loan, the invoice of the goods you bought.
With all of this in mind, try to put your ducks in a perfect row and reach out to your ideal financial institution to select the best small business loans you can have. Don’t be afraid to ask for what you need.