Yoga Studio Business Loans
Starting a small business can be fun and exciting, but it can also be overwhelming. Getting a small business loan can ease some of the financial burdens you may be experiencing. Even if you are proven to be a successful business owner, you will face a stressful and daunting loan application process. There are several steps you can take to relieve some of the stress you will face with applying for a business loan.
Know your options
Before you start the yoga studio business loan application process, you should understand the needs of your business. Some things to consider include:
• Do you need seasonal inventory?
• Do you need equipment?
• Do you need to purchase real estate to expand your business?
• Do you need cash reserves to deal with slow paying clients?
You should also understand your financing options. A yoga studio business loan is one of many financing options you can choose from, which include:
• Unsecured business credit cards
• Factoring or invoice financing
• Angel investment or venture capital
• Crowdfunding or peer-to-peer lending
Once you have an idea as to how you want to go about getting working capital for your business, you will need to check your credit. Your credit will give you a better idea of what of what type of financing you can get.
Analyzing your personal and yoga business credit score
A lender will not approve a loan if they feel that there is a good chance you will not pay back the loan. Your credit report gives lenders an idea of what your financial reputation is, how much money they will be comfortable lending to you, and how trustworthy you will be in paying back the loan. Your credit score isn’t everything, but it provides the lender an idea of how you handle money. To increase your chances of getting approved for a loan, maximizing the amount of money you can borrow, and improving your chance of receiving favorable terms, you will want to make sure your personal and business credit scores are as high as possible. To accomplish this, you can:
• Make sure you are making payments on time
• Check your credit report for any errors that can be disputed
• Look for any past-due payments that you can quickly pay off
• Payoff any federal or state tax liens or collection accounts
• Pay down as much of your current debt as possible
It may take several months to clear up these issues, so it is important to start improving your credit score as soon as possible.
Know why you are asking for a loan for your yoga studio
You are less likely to be approved for a yoga studio business loan if you are not specific about what you want to do with the loan. Lenders are fearful of providing a loan to a business owner who may use the funds to pay for a lavish personal lifestyle. Being specific about your loan request can help a lender better assess your loan application. A good way to show a lender that you understand what your business needs are is to write out a budget on how you plan to use the funds. For instance, if you need to purchase equipment, the lender will want to know several things such as:
• How much will it cost to purchase and operate the new equipment?
• How will the equipment be used?
• How much revenue are you expected to generate from this equipment?
You do not have to provide the exact numbers, but it gives you a solid justification for your loan request. It also lets the lender know that you understand the needs of your business. Also, keep in mind that lower loan amounts are easier to get an approval than higher loan amounts. Knowing the cost and expenses of new equipment helps to lower the loan amount.
Understand your financial statements
In addition to your credit report, a lender will want to look at your financial statements going as far back as five years. The most common statements a lender will ask for include:
• Profit and loss statements
• Accounts payable and receivable statements
• Balance sheets
• Cash flow statements
• Federal and state tax returns
• Bank statements
Many lenders will base their lending decisions on your company’s cash flow and profitability. They want to know how you make your money, how much it costs to operate your business, and if you are making a profit. If your profit margins are too low to justify the loan amount you are requesting, then the lender can look to see how much cash reserves you have available. They may also use any business-related office equipment, inventory, or commercial real estate that you own as collateral.
Once you have submitted the loan application with all the necessary financial documents, the lender will determine the size of the loan that is right for you. If your loan is approved, the lender will present you an offer, which will include both an interest rate and an Annual Percentage Rate. The interest rate is what the lender charges you on the principal amount of the loan. The APR represents the total amount of interest, fees, and service charges you will pay on the loan. Carefully understand both numbers to make sure the loan offer is right for you and your business.
A yoga studio business loan is a great tool to use to help grow your business, but it may not be appropriate for every situation. There are plenty of other financing options available such as invoice financing, which does not involve going into debt. Also, keep in mind that many lenders will be reluctant to provide you with a yoga studio business loan unless you have been in business for at least six months to a year. Be sure to discuss your options with your accountant, your business attorney, and/or your financial advisor