Cell Phone Dealer Small Business Loans
Many new and aspiring business owners find themselves wondering if they really need a small business loan. The answer to this question is quite simply, yes. Small business loans not only help you get your business off the ground, but they’ll also help to keep your business running smoothly. Many times, new business owners will assume that the savings they have already will keep their business afloat. They might even factor in a little extra cash for unexpected costs. However, many new business owners miss and underestimate costs. This article will address the different types of business loans and how to get approved for them.
Business loans come in all different shapes and sizes.
Most business owners are familiar with Small Business Administration loans. These loans are funded by banks and credit unions. They offer lower interest rates and guaranteed terms. They’re also standardized, so cookie cutter underwriting guidelines make the process rather straightforward and transparent. An interview with a bank loan officer is always required. You’ll need to demonstrate that you have a solid business plan and are a reasonably safe risk. The downside to these loans is that they’re more difficult to qualify for if the borrower’s credit history is below average. The other consideration is that these loans will often require that use some type of collateral to guarantee the loan. Another benefit, however, is that they’re insured by the government. It’s important to know your business plan inside and out. If you can’t convince the interviewer that you have a solid proposition, the chances of being approved go down significantly.
Crowdfunding is a relatively new type of loan. This is when a group of investors pools their funds to finance a business. As with SBA loans, they’ll want to make sure that you’re a decent risk. The benefit to these loans is that personal credit isn’t scrutinized quite as much. However, these loans will most likely not have terms that are as favorable as a bank. They’re also unlikely to be flexible if you’re unable to repay the loan. The business plan must be airtight. These investors will most likely be seasoned industry professionals. They’ll most likely be apprehensive to trust someone who doesn’t have any experience in the proposed business. This is a good option if more traditional options are limited or impossible.
Private investment and equity firms are also alternative loan sources. The underwriting with these loans is most likely to be among the easiest. However, your credit will most likely play a part in their decision-making process. Typically, you must be willing to give the firm equity in your business. This means that they own a certain percentage of the business. If the business is sold or bought out, they are guaranteed to receive money from the deal. The terms of these loans are rather varied, so you’ll definitely want to shop around if considering this option. Since there will most likely be a rather complex contract, hiring an attorney is a must. This is an option to consider if you’re unable to get approved for an SBA loan due to credit history or have limited assets.
Established businesses have a few more options available to them. A business line of credit is sometimes beneficial if there’s no immediate need for funding. This loan offers quick funding when the credit needs to be utilized. The interest rates are almost always considerably higher than an SBA loan, so careful consideration must be given to this option. Credit and profit and loss statements are typically heavy factors in getting the loan approved. Businesses with poor credit are unlikely to be approved for this option.
Invoice factoring or financing is another option. With this loan, funding is provided on sales that have been invoiced but not repaid. You’ll have to provide information on your receivables that are able to be verified. The draw to this option is that credit isn’t given nearly as much consideration as with other methods. The interest rates and terms are reflective of this. This is a great option for businesses that require quick funding and don’t want to go through a lengthy and complicated approval process.
Merchant cash advances are perhaps the newest form of small business loans. With this type of loans, the business is paid based on already processed sales. While this is a great option for businesses that are doing well, it’s not for underperforming businesses. Another benefit is that the business owner doesn’t always have to repay the debt at a later date. This is a solid option for a business that may have credit issues or anticipates a sharp increase in business.
Tips for improving credit:
Having a good FICO score is a huge benefit to a business owner. Personal credit is almost always used when underwriting a small business loan. Credit monitoring services should be utilized to make sure the owner is aware of what their financial position is. If poor credit stands between you and a loan, there are options. Credit repair companies can be worth their weight in gold for the small business owner. For a small fee, the agency will dispute items on your credit report for you. If you don’t want to pay for the service, you can dispute the items with the credit bureaus directly. It’s important to note that the agencies will have much more experience in dealing with the credit bureaus. For this reason, the chances of having negative items removed are much greater.
After you’ve decided on a small business loan:
If you’ve already applied for a loan, stay on top of the approval process. Having documentation ready is one of the best things you can do. After the loan is funded, ensure that the payments are being processed and received on time. These simple steps will keep you abreast of any issues and increase the chances of being approved in the future. Getting a small business loan is easy with a little tenacity and due diligence.