How Do You Get a Business Loan?
Business loans are currently among the most popular forms of commercial financing available to entrepreneurs seeking to begin a new business. Yet the decision of whether or not to apply for such a business loan is an important decision to be taken gingerly, and certainly not one to be taken with a grain of salt. As the need to fund your new venture becomes more apparent, the amount of business loan applications that are submitted also increases.
One of the most common types of business loan applications that are filed by entrepreneurs seeking financing options is what is known as the merchant cash advance. This type of business loan allows business owners to obtain a temporary advance on their business funds to help them pay their bills and other expenses until their business is able to generate enough regular cash flow to repay the advances that are owed to the lender. There are a number of advantages that this type of business loan provides for both the borrower and the lender. To better understand these benefits, it is important to examine the common types of merchant financing options that can be found through your local bank.
Merchant cash advances are generally quite safe investments for most business owners because they carry very little risk of non-repayment. The reasons for this are that the interest rates are typically quite low, which makes it affordable to many business owners; and the terms of repayment are generally rather easy to agree upon. In order to secure a merchant financing loan through your local bank, your business must first complete an evaluation of your financial situation in order to determine how much money you will be able to borrow. Once the business owner has determined how much funding they will require, they can then arrange for a discussion with the various banks that they may have applied to.
The key takeaway from this discussion is that the lenders want to see a solid history of success. In order for you to qualify for a merchant cash advance loan, it is important that your company has been operating for at least two years. In addition, during this time you should have paid back all of your other past loans in full and are currently not involved in any default accounts.
There are a number of online lenders who will provide you with this type of financing options. One of the best things about working with these online lenders is that you can apply without filling out applications in person. Although you will still be required to complete some basic business finance information through the lender, the amount of paperwork required is substantially less than what you would need to fill out when dealing with your local bank.
Another option available to you is to work with business credit unions, local businesses, or other lenders that offer a traditional lending option. These loans will be more expensive than the online loans, but they will require you to submit business credit reports and proof of assets and liabilities to the lender. This form of financing will also likely require that you have a current business credit report. By having a current business credit report, you will be able to show the potential lender that you are financially responsible and capable of making monthly payments on-time.
If you are interested in working with an online lender, you are encouraged to complete your business credit report and other financial statements in order to determine if you are a good candidate for the loan. By completing these documents, you will be able to show the lender that your company meets all of their lending criteria. Once you meet the lending criteria, the lender will give you a quote to get you started. When you receive the quote, make sure that all of your personal information is correct. You should also be prepared to provide the lender with the necessary forms to receive the funds.
Although many small business owners receive financing from traditional lenders, it may not be the best option for your business. There are many small business lenders online that specialize in providing small business loans. These lenders can help you obtain the capital you need to start or expand your business. In some cases, the small business finance that you receive is non-recourse – meaning that you do not have to repay the funds if the company does not perform as promised. If you are interested in obtaining small business finance, consider starting with an online lender.
Infographic created by Donnelley Financial Solutions, an SEC reporting software company