The majority of growing small business owners will need to have access to funding of some kind sooner or later. It’s a normal and fundamental part of growing a business and making it profitable. However, that doesn’t mean that you should dive into the loan application process blindly. Before applying for a loan, there are certain questions that should be addressed first prior to applying for a loan.
Why do I want a small business loan?
The most significant question to answer is “Why?” Your reply should include exactly what you plan to do with the money received. Truth be told that not all funding reasons are enough to justify a loan, explained Forbes contributor Aileron, an organization that provides small business management consulting.
For example, trying to obtain funding to settle continuous losses isn’t an excellent strategy – you’ll most likely have to solve the issue before applying for a loan.
Some types of sound reasons to use for a loan include:
- Expanding your business to aid growth.
- Adopting new equipment to boost operations.
- Stocking through to inventory in preparation with regard to a big order.
How much do I want?
As soon as you’ve determined the objective of the funding, you can start to calculate just how much you need really. It’s vital that you narrow it down to one so that it is possible to justify through data and research.
When lenders review your loan application, they come to their own conclusion to determine the total amount for the intended purpose. If your loan provider determines that you requested for $5,000 significantly less than a person need, it’ll improve the question of why you aren’t requesting your full necessity and could reflect poorly on your own company, Entrepreneur article writer Lisa Girard wrote inside a 2013 write-up.
On another hand, asking for a lot more than you need could make you look like or even greedy you’re hiding an intended purpose – two impressions you don’t desire to make.
To, dive into your intended purpose, will the small business loan provide enough cash-flow? Determine how much you’ll be able to repay your lenders and how much you’ll generate from your own business customers. Will the money be used to get or lease equipment? Estimate the entire cost of obtaining that machinery as closely as possible.
Am I eligible for the loan?
This question is crucial to answer honestly before trying to get a loan. If you make an application for funding that you don’t qualify, you probably will not get a loan. Before trying to get any loan, research the funder’s requirements. Do they need five years in company revenues? Don’t apply if you’ve just been operational for two years or less and find another lender who’s ready to offer financing to companies like yours.
At National Funding, companies are required to be in business for at the very least a year, generate $100,000 in annual gross revenue and able to show the past three months of statements would be eligible for a small business loan. Does this appear to be your situation? Touch base for a no-obligation discussion today.