portland small business loans
Deciding to obtain a small business loan is a huge financial decision, whether you have an established business or a startup. With the help of a loan, you can gain access to the funds you need to support your company and its growth. However, getting the loan is not always an easy process. You have to supply all the necessary documents and comprehend certain fundamentals.
If you’re familiar with small business loans, you understand that you still have a lot to learn. Here are the top things about these loans for small businesses that you probably don’t know yet:
Both your personal and business credit ratings are essential.
Many entrepreneurs think that since they’re applying for a small business loan, it automatically means the lenders will only look at their commercial credit report. However, personal credit scores have a bearing on several loan aspects, including the interest rates. It is crucial that you know your numbers in advance.
You can have different scores from the credit reporting bureaus.
Three separate companies compile every consumer’s credit report:
The Federal law states that you have entitled to receive a credit report for free every year from these three reporting agencies. If you have the statements in your hands, don’t be surprised that you have varying scores from these three companies. What is significant is that you look for errors and have them changed within 30 days upon receipt of the report.
Before applying to any lending institution for your small business loan, you should make sure whatever’s in your credit report is correct and accurate.
The three agencies use the FICO system to provide scores for credit ratings.
FICO scoring has a system where 750 and up are considered excellent scores. Many banks require the applicant to have a credit rating of at least 650 to 680, but there are some that accept a 600 credit score.
You can have a bad credit rating but still, qualify for a loan.
While banks and most creditors don’t approve loan applications of people with low credit ratings, some online lenders are willing to work with these consumers. If you want to go the traditional route where you only want to obtain your fund assistance from banks or lending organizations, you can take some time to improve your credit score.
It is possible to achieve a better rating with the following tactics:
Avoid having delinquent accounts by paying bills on time.
Stay away from high outstanding debts.
Only open or apply for new credit accounts when you need them.
Pay everything you owe.
You need to be patient in improving your score. What’s important is that you are consistent with your efforts in rebuilding your credit. If you have negative information on your statement, such as bankruptcy, too many inquiries, or late payments, the best thing to do is to pay your bills first. You will have to wait for some time before the score changes to your favor.
There are specific requirements for the documents you submit.
Before you apply for a loan, you should have all the vital documents ready. The requirements vary from lender to lender, but certain documents are necessary for all institutions. Note that some records need to be notarized while others may be required to be originals and not photocopies.
Some of the files that you should prepare include:
Income tax returns, both personal and business from at least two years ago
Tax statements, including property, marketing, and municipal
Overview and history of your company
Your business’ income statement
Business organization documents, such as LLC agreement, articles of incorporation, and the like
Payroll records from the past six months or so
Title deeds that the business owns
Bank statements that are usually from six months before the application
If you plan to use collateral, you should also provide its title deed.
APR and interest rates are not the same.
The annual percentage rate or APR is a representation of what the loan is truly like. It tells you the real cost of the small business loan. If you have already borrowed via a credit card or mortgage, you probably know what the APR is or at least you’ve heard about it.
APR includes the interest rate, along with other fees, such as maintenance charges that you may have to pay each month and the origination fees. It is a standard method of communicating to the buyer about how much the loan charges after adding up all the payments required.
You will encounter several fees, including the interest rate that can either be fixed or variable.
Aside from the APR, the lender may impose specific fees to your account. Among them are early-prepayment penalties, application fees, and late fees. Apart from that, you will mostly find yourself wondering whether a variable or fixed interest rate is right for you.
The fixed interest means that it will not change, while a variable loan is the opposite. The variable loan normally has a lower interest rate than one with a fixed price. However, it is possible that the amount you need to pay will change dramatically over the life of the loan.
You have many options, particularly with the type of credit to go for.
The speed of the funding, as well as the application, will affect how you choose the loan for you. There are some instances where your small business may require quick cash to purchase inventory or meet payroll payments. It is why it is necessary to ask the lender how long it will take you to know whether or not your application is accepted.
Lenders are not created equal.
Banks and lenders also have a reputation to protect just like you. Make sure the creditor you choose has a solid reputation, and its customers are happy with the service. It’s always useful that the bank is willing to provide help, especially when the small business owner needs to ask questions or for assistance.
If you have established good business credit and you have made sure your payment activity is positive, you will have an increased chance of getting the loan with favorable terms for you.