Nothing kills a business faster than lack of funds. This is because there are lots of areas that need to be covered; you have to pay for facilities, supplies, raw materials, new staff, etc. You could also just be ready to take your business to another level and the company just isn't making enough money to pay for all that.
In light of this, business owners consistently look for reliable means through which they can get loans for their business and might be so boxed to a corner that they accept any kind of loan that comes their way, so far it pays the bills.
However, not every business loan is right for you, because it's not just about borrowing to get approved or getting just any form of financing. It's more complicated than that, and if it goes wrong, you end up giving the lenders the upper hand to take way more collateral with the loan, or worst still, your commitment to maintaining or improving your personal credit begins to decline.
To avoid this trap, consider these five tips as your guide to choosing the right loan for your business. 1. Know what you want
The main reason you're looking for a business loan is because you need money – money you don't have at the moment. It is only necessary that you have an idea of the exact amount you're in need of.
It's also important that you be realistic with the range of amount you're in need of. This is because it will be a reflection of how familiar you are with your business's potentials and growth
, to the lender.
It's needless to say that a small loan offer that's too small to foot the bills is not worth taking, and one that's too big could also be an issue, so you have to settle for just the right amount.
Be responsible with what you're asking for and have a laid down plan of how it would be spent.2. Be patient
Generally speaking, when it comes to the business financing aspect, getting fast cash is very expensive.
Upon sighting the urgency of your need for the money, lenders will hike up their rate so as to cover for any potential losses.
On the other hand, if you're willing to slowly go through the process of getting the loan without any rush then you could be looking at a more affordable loan.
If the need for the cash is really urgent, then there's little or nothing you can do than just getting the loan at the price it comes with, but if you can be patient enough, you will be able to save money.3. Have a plan
You can’t be wondering how to get a business loan
without a concrete plan of what you’ll be using it for.
There are different types of loans
, and until you have a perfect understanding of what you need the loan for, you might find yourself picking the wrong loan which might in the long or short run, affect your business adversely.4. Know the term
Some loans can be paid back over the course of 6 months, while others take 3 years.
Do you know which you'd rather go for?
A long term loan. It may sound intimidating, I mean having to keep paying back the money you owe over the course of 3 years, that's a lot of time, but hardly do people know that it's loans like this that come with larger amounts and lower interests. The only disadvantage to it is that it’s only given to business owners who have a proven track of success in their business.5. Cost
Know the cost at which you're getting the loan so you can figure out if your business can afford it.
Ask if there are any additional costs that come with the loan, the annual percentage rate (APR)
, or if there's a prepayment penalty. This will give you an accurate estimate of the total cost of the loan. Then you can decide if your business can afford it or not.
Getting a loan is just a matter of matching your business needs with the available options and going for the most suitable one. Good luck!