Business loans are invaluable for enterprises regardless of size, allowing them to enhance cash flow, purchase equipment, and assets, and leverage growth opportunities. There’re numerous small business loan options from different financiers, including banks and alternative lenders. When shopping for a business loan, consider the following factors.
The first step in choosing a business loan is to assess your financial needs. Identify the loan’s specifics, such as amount, use, repayment period, and collateral requirements. Below are a few questions to help determine your financial needs.
- What’s the loan use? Do you want to buy inventory, hire additional employees, refinance debt, expand operations, or purchase real estate?
- How much loan do you need?
- What’s the repayment period?
- What collateral will you use?
- What’s your total outstanding debt?
While there’re many small business loan options, many business owners make the mistake of settling for the first option they get. It is best practice to research your loan options to get the best deal possible. Conventional bank loans appeal to business owners with low-interest rates but can be challenging to get approved and have shorter repayment periods.
While SBA loans favor borrowers, they have stricter requirements, more paperwork, and more extended approval periods. Businesses increasingly opt for alternative lenders because they don’t require an excellent financial history and can be approved almost instantly.
Almost all small business loan options assess a company’s credit score before they approve a loan. They may want to know your credit score, business credit history, annual revenue, and years in business. A strong credit score is financially advantageous because you get more lender choices and lower interest.
Some lenders require a stellar credit score more than others. While a poor score does not mean a business won’t qualify for a loan, it affects loan terms, especially the interest rate. Since alternative lenders do not have stringent credit score requirements, they are attractive to businesses with a less-than-perfect financial history.
Small business loan options are many, whether you want to keep your company afloat or purchase assets. When choosing a business loan, consider your financial needs, loan options, and credit score to get the best possible deal. Reach out to Scarlan Capital Group for more information.