Things to consider when comparing lenders After you’ve looked at…
Auto Body Repair Shop Business Loans
Auto Body Repair Shop Business Loans
Most new business owners consider applying for a small business loan. Whether you intend on applying or not, it’s always best to apply for a loan. Small business loans provide you with accessible cash for whatever reasons you may need it for. Even if you have a substantial amount of savings or assets, you can’t predict the future. Many businesses that don’t apply for a loan find themselves in financial trouble later. A larger than anticipated bill or lawsuit can be crippling to a business. In a few easy steps, you can have a loan approved and focus on growing your business rather than worrying about it.
What factors are taken into consideration when applying for a small business loan?
Small business loans look at the whole picture. A business plan is the first thing you’ll need to have ready. A solid business plan shows lenders that you’re prepared to start a business and that your business is viable. If you’re inexperienced in writing business plans there are a couple of options. You can hire someone to write the business plan for you. If you choose this option it’s incredibly important that you convey all the information to the author. It’s also important that you thoroughly proofread it for obvious reasons. You can also take a quick course in writing a business plan. It’s always a good idea to have a second set of eyes to inspect the finished product. Prototypes and models are also good to have. The more thorough you are the better. A poor business plan can ruin your chances of an approval so it’s important to make sure it’s perfect.
Your credit needs to be as good as possible.
Most lenders will require that your personal and business credit is strong enough to make a confident decision. If you have credit issues, it’s best to resolve as many of them as possible before applying. If you’re uncertain as to how you’ll fix your credit, a credit repair company might be able to help. These services typically charge a monthly fee to dispute items on your credit report. Your FICO score will likely improve within a few months of using these services. It’s important to note that the more work that needs to be done means the longer it will take to repair it. If you’re uncertain as to where your credit stands, you can order a free credit report each year from all the major credit bureaus. You can also subscribe to a credit monitoring service. Many of these services charge a fee, however, some are free.
After you’ve inspected your credit:
Other items that a bank will consider include previous employment, income, and assets. Many banks will require that you’re able to secure the small business loan with collateral. This can range from your home to vehicles and retirement accounts. Unfortunately, for most borrowers, the bank will require some use of personal items or funds to secure the loan. You may also be required to purchase additional business or personal insurance as a condition of approving the loan. Having as much documentation ready upfront as possible will make the process much faster and smoother.
What types of small business loans are available?
There are several different types of loans. A Small Business Administration loan is the classic and most popular option. This loan weighs personal credit and assets heavily. An interview is typically required and you’ll have to prove that your business will most likely succeed. These loans offer competitive interest rates and fixed terms. These loans are backed by the federal government which is why lenders like them. Typically, a bank would be the place to get started with an SBA loan. This is a good option for those who have strong finances and good credit.
A business line of credit is typically reserved for existing businesses. You’ll definitely want to have established and good business credit. Also, these loans may require some form of collateral. The attractive thing about these loans is that the rates are still in the competitive range. Business owners also like the fact that they can use the line of credit in an emergency due to its quick funding. Even if you don’t use the entire line of credit, you must still repay it. This is a good option for businesses that would rather stay away from higher interest alternative business loan products.
Invoice factoring is a relatively new concept. With this type of loan, businesses are able to use accounts receivable balances to borrow against. The lender will require that you have an established receivables history that it finds acceptable. Since this is an unconventional loan product, lenders will not place as much emphasis on personal credit. This is a good option for businesses that anticipate an increase in sales and need cash in the interim.
Merchant cash advances also use receivables as the basis for lending. The concept is simple. The lender is advanced money on their credit sales. Personal credit is not given much consideration if any. The amount that’s borrowed is simply deducted from the deposit. This is a convenient option for businesses that have poor credit. The interest rates and fees are typically higher than a conventional loan. With any type of alternative small business loan, the terms vary widely from company to company.
After you’ve applied for a small business loan:
After you’ve applied for a loan, it’s important that you stay in touch with the lender. If you’re able to prepare yourself ahead of time, you will get the money much faster. You should also be prepared to explain anything that the lender might find objectionable. Being upfront and honest with the lenders will get you far. Chances are they’ve encountered the scenario before. After getting the loan approved, simply make sure that you’re following the terms and making your payments as scheduled. Small business loans can provide you and your business with a comfortable cushion that will come in handy, eventually.