Running a business can be one of the most fulfilling adventures of your life. Not only can your business bring you great personal wealth and job satisfaction, but you can also help your employees reach their dreams and financial goals. It may be cliche to call small businesses the backbone of the U.S. economy, but that doesn’t make it less true.
Of course, as satisfying as running a business can be, it also comes with a lot of work — and risk. Because of this risk, most business owners will seek loans at some point in their career. Approximately 82% of all businesses that fail do so because of cash flow problems, which is where quality business loans come into play.
Getting personal loans are typically easier than commercial loans. Businesses often rely on these loans to obtain immediate working capital. This money can be used for everything from payroll to opening a new location.
If you’ve never applied for a business loan before, then you may have questions about how to get started. Here are some important steps to keep in mind when attempting to get a quality small business loan:
- Determine why you need the money — First, you need to ask yourself how this loan will actually help your company. It’s one thing to receive a credit line for day-to-day expenses, but you should have specific plans for the money you will receive. Are you relying on commercial loans to get your business off the ground, to invest in new equipment, to have a safety cushion, or to simply grow your business?
- Figure out the best type of small business lender and loan type — There are plenty of commercial loans that you may qualify for, but it’s important to select one with low and reasonable annual percentage rates (APR). You need to be able to stay on top of your loan’s regular payments in order to stay out of additional financial trouble.
- Monitor your credit and risk profile — Lenders will make a final judgment call on whether or not to administer a commercial loan based on your credit, assets, and risk profile. Typically, they will look at the following factors: credit score, credit report, outstanding loans, cash flow, commercial assets, experience, investors, and financial statements.
- Compile financial documents — In order to ensure a quick and easy loan process, it’s best to acquire all the essential documents you’ll need. Gather all financial statements and business statements, state registrations and licenses, legal documents, business and personal tax returns, and anything else that could help.
