It’s often said that the hardest part about taking out a small business loan is not paying it back but preparing for funding. This refers to the myriad measures applicants must take to ensure they are approved for the amount and terms they need to grow. One such measure is figuring out which type of small business loan makes the most sense for their individual goals. A few decades ago, there would have only been a small list of viable options to choose from. But thanks to the rise of alternative business financing, potential borrowers can now choose from nearly a dozen different business funding programs.
These new programs were created primarily to increase accessibility for funding. But it’s hard to deny that they have simultaneously made the preparation process more complicated. Here’s which factors to examine when choosing the right small business loan for you:
You shouldn’t look too deeply into any program if you aren’t sure you’ll be approved. Each option has different requirements, and your ability to fulfill these requirements will determine the amount and terms you receive. As you probably already know, you will almost certainly be approved for just about any program you want if you have strong credit, revenue, profits, and cash flow. Problems with either area will shrink your list of options but, contrary to popular belief, does not mean you will automatically be stuck with excessively restrictive terms.
For example, if you have poor or very little credit history, you may still be approved for a merchant cash advance, revenue based business loan (business cash advance) or a working capital loan. If you are frequently prone to cash flow shortages or dips in revenue, you may be approved for a business line of credit and accounts receivable factoring along with the aforementioned options. To narrow down the selection process, think about which of the four areas you have the most trouble with. After all, your answer will most likely be the same reason you pursued small business loans in the first place.
2. The Purpose Of The Loan
The functionality of small business loans is increasing every day. You can use the money for pretty much anything, but you should never contact a business lender without a clear spending plan. Some borrowers use small business loans to increase revenue while others are merely looking to stabilize tumultuous cash flow. Some investments will produce returns right away while others will not directly contribute to revenue for a number of months. Plenty of borrowers even use small business loans solely to pay off other outstanding debts or stay current on regular business expenses.
The desired outcome of the business loan will ultimately determine which repayment system will be most conducive to success. It is in your best interest to be as detailed as possible when defining the purpose of the business loan. You might want to make a list of short term goals and long term goals. The ability to pay suppliers early or several weeks later than usual, for instance, will likely increase profits and allow you to put more money away for growth-related investments.
3. Am I Working With The Right Business Lender?
Every business lender is different, even those that offer seemingly identical programs. Once you have an idea of the program that makes the most sense for you, the next factor to consider is the business lender you’ll be working with. Aside from the right borrowing amount and terms, think about what you want from a business lender. Maybe you are mainly concerned about speed and convenience. Maybe you are looking to form a long-term relationship with a business lender in which you’ll eventually take out a second and third round of funding.
A big reason companies like United Capital Source are becoming more popular is their unrivaled customer service. Many UCS customers did not like the way they were treated by banks or online business lenders like PayPal Working Capital. They contacted us when they learned that we would answer their questions promptly and honestly. We also understand that not every business owner is a financial genius. If a borrower isn’t sure about something related to budgeting, taxes, or other financial headaches, we are happy to give advice, even if the borrower isn’t currently paying back a business loan. And unlike most other business lenders, our terms are usually negotiable. If an uncontrollable or industry-wide circumstance is impacting your revenue and/or cash flow, we will likely adjust your repayment structure to account for such dilemmas.
The Preparation Process Is A Bit Longer For Some
Let’s say you know which business loan is right for you but you don’t fulfill every single requirement for approval. Well, at least at this moment. You may find that there are numerous things you can do to obtain the missing requirements in the near or distant future. Common examples include cutting expenses, getting a new business credit card, or taking a different type of business loan that is very easy to pay back. This will likely raise your business credit and make you eligible for your original choice. As long as you accept just how lengthy the preparation process may be,no small business loan is out of reach.