Manhattan Small Business Loans
Your manhattan small business needs funds, which you can use to hire new employees, buy new equipment, and increase sales using different methods, such as opening a storefront. If you are facing a capital deficit, you may be tempted to go for a small business loan.
If you get approved, a Manhattan small business loan can help you get the funding you need to jumpstart the expansion of your company. Unfortunately, these loans are notoriously difficult to obtain. Also, if something goes wrong with your business, you could end up losing the collateral you put up for a specific loan.
Applying for a Manhattan business loan means the bank or lender may accept your application or deny it. You could also end up getting caught in a lending trap. Thankfully, we can help you be prepared for the process. Here are the top things you need to know before you apply for a small business loan:
Be Sure You Need the Small Business Loan
It may seem obvious that the owner of the small business knows the reason why he or she needs to apply for a loan, along with the specific amount to borrow. Most startup businesses though find these details as a considerable challenge. Typically, owners are unsure whether or not they require financing.
If you are certain you need it, you need to take time to determine why you need the loan. It is also crucial that you can clearly articulate the whys and how much you need. Some reasons include:
Purchasing real estate and expanding operations
Buying equipment and inventory
Increase money for managing daily operations (working capital)
Once you have the answers, you should focus on two things to get approved: your credit or financial situation and your reason(s) for applying for the loan.
Know Your Credit Scores
Your credit scores tell the lender regarding your reputation as a borrower. If your scores are low, do not expect the bank to approve your loan easily. There are two types of credit scores, and many lenders look at both:
Business or Commercial: The company should establish its credit history so that it will be quicker to obtain credit. After getting the federal tax ID number, the credit bureaus, such as Experian and Equifax start tracking credit and other transactions, specifically when a supplier allows a company to buy now and pay later.
Personal: Owning a business doesn’t mean you have to neglect your personal financial accounts. They still matter to lenders, and they look at how FICO or VantageScore sees your performance.
Many companies don’t realize that it is important to have personal and business accounts separately. Payment histories affect both types of credit, as well as the following:
High Outstanding Balance: If you have a lot of debt, you will be penalized for it – even if you pay on time. It is always a good practice to pay enough, or at least the minimum required amount.
High Utilization Rate: Credit utilization is the amount you use based on your revolving credit limit. Divide your balance by your credit limit and multiply the answer by 100 to get the utilization percentage. Preferably, the number should be below 10%.
Improve Your Credit Score
Prior to applying for a Manhattan small business loan, you should ensure your credit scores are ideal. Here are the steps to take that can help raise both your personal and business credit scores:
Get a copy of your credit report. With the Fair Credit Reporting Act, you can access your credit report for free. Go to Nav or CreditSignal’s site to get your business credit report. For personal, choose from any websites, including Credit Karma and freecreditreport.com.
Make sure the report is error-free. Credit reports can have mistakes, such as the absence of a certain business activity that can boost the score. If ever you find an error, report it immediately.
Have a payment plan for your tax liens. State or federal tax liens can affect your score. If you can, pay the claim right away or simply have a payment plan that will help you pay for it.
Contact the creditors you have existing debts with and pay them down as soon as possible. Your credit report will provide you with the details about how much you owe and to which lender. If it’s past due, reach out to the creditor and pay for it as soon as you can. You can also request for a goodwill adjustment where the lender removes a late payment from your credit report.
Other simple ways to enhance your score include
- Using less than 30% of your available credit
- Keeping an old account even after you have finished paying for it
- Improving your score through diversifying your purchases, such as buying on installment and opening a new account
- Avoiding to opening many accounts at the same time
- Using the services of a credit monitoring company
Get a Firm Grasp of Your Use Case
Several business owners get a small business loan and end up having difficulty paying it. You need to be smart in determining how much you need and how much you can afford. If you are unsure, you can seek the help of an accountant before you apply for the loan. Here are some methods that can assist you:
Figure out how much you need now by having a budget for the funds you’d receive from the loan. Determine what you will use them for and estimate their costs.
Support your application with financial statements, including your balance sheet and income statement.
You can also provide your cash flow statement along with the other two above. The documents will tell you where you’re making money and whether or not your business is lucrative. Being unprofitable doesn’t mean you cannot get the loan. What banks are interested in is how you plan to get out of the situation, which you should show during the application process.
Apply for the Loan
Once you have performed all the techniques mentioned above, it’s time to apply for a small business loan. Make sure that you have your financial statements ready, as well as your accounts payable and receivable and tax returns.
If you get approved, the lender will determine how much to offer you. The company will take note of your business financials. It will include an interest rate, which can either be fixed or variable. It pertains to the cost of borrowing the principal loan amount. The offer will also have an annual percentage rate or APR, which is a broader measure of the loan and shows you the yearly interest to pay, along with the service charges and other fees.
Compare both the APR and the interest rate to find out if the small business loan is right for you. Low-interest rates may not always be better since they usually have higher APR.