Depending on your credit and know-how, you can ensure a smooth launch to your first company.
When you know you have a great small business idea, all you want to do is dive ahead and get started. Enthusiasm is great. It’s what will motivate you to keep going through long hours and without any days off for a while. Still, there are certain areas that you won’t want to rush and that includes your small business loan. Depending on your credit and how you’ve prepared yourself, you could end up with the ideal opportunity or a financial burden.
While depending on your credit for a good small business loan is a start, it’s far from the only factor to consider.
Proper financial planning is exceptionally important to your success. This is true whether you’re a first-timer or you’ve been launching businesses throughout a lengthy career. Even if you have very little knowledge in this regard, it doesn’t mean that you can’t do it. Take the time to give yourself an education.
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Use the following dos and don’ts to give yourself a boost beyond your credit with a small business loan.
- Do have a business plan ready – This will be one of the most important documents you can provide the potential lender. Without a business plan, don’t expect to be taken seriously.
- Don’t start contacting lenders before you know why you need the loan – Aside from the business plan, your lender will want to know why you need the money in the first place. Based on your business plan, come to understand your definite or potential business expenses. This will lead you to know that your loan will likely pay for at least one of the following categories:
1. Startup expenses
2. Day-to-day expense management
3. Business growth
4. Safety net
Show your prospective lender you’re prepared with real, substantiated numbers
- Do create a budget – This should be a real budget based on substantiated numbers. Neither you nor your lender should be interested in general market statistics or product hype. Your lender isn’t nearly as interested in your business potential as it is in your solid understanding of how profits will be made. When you have hard numbers in front of you, you will equip yourself and the lender with a reason to invest in you beyond hope and dreaming.
- Don’t think all business loans are created equal – Find the right type of loan for your small business. Knowing why you want the money and having your budget established will help to guide you through this step. If you are looking for startup money, the odds are nearly entirely against you when it comes to small business financing. Lenders want to see cash flow before they will offer a loan. How else will they know that you can repay them one day?
Startups need to borrow from friends or family, crowdfund, take out a personal loan, use a business credit card or receive a micro loan from a nonprofit. After the first year, your odds of a small business loan may increase. Look into your choices and consult with an expert if you require added guidance. Options include:
1. Term loans,
2. SBA loans,
3. Invoice factoring and
4. Business line of credit.
Remember that your small business loan isn’t just money, it’s a relationship.
- Do choose the right small business lender – Depending on your credit, you may be able to find a small business loan from any of several different types of sources. Many people think their bank is their only option, but nonprofit micro-lenders and online lenders also offer a number of appealing options.
Online lenders can be a solid and convenient way to both apply and receive customer support. Many small business owners prefer them as they can inform themselves, apply and manage their loans from the comfort of their smartphone or tablet.
Most small business owners are not seated in front of a computer in an office all day. They’re on site at a shop, out consulting, are creating, or are otherwise on the go. It is more common for an entrepreneur to communicate via voice, text, email and live chat using a mobile device than any other method. This includes financial activities and banking.
Small business owners with an understanding of these dos and don’ts have a much clearer picture of the type of funding they need and how they can obtain it.