Are you interested in applying for a business loan? Do you have concerns about the timing? Do you have questions about which lender is best for a company in your position?
Applying for a business loan is a big decision, as it will impact your company in a variety of ways.
On the plus side, a business loan gives you access to the funds necessary to grow your company and reach your goals.
Conversely, if you take out a loan you can’t afford to pay, it’ll have a negative impact on your company, thus putting your financial health at risk.
With all this in mind, there are five questions you should answer before applying for a business loan. Doing so will give you the knowledge necessary to make an informed and confident decision.
1. How will you use the funds?
You should never borrow money without first having a clear idea of how you will use the funds.
Maybe you want to borrow money to buy new equipment. Or maybe you need additional funds to carry out your marketing plan.
It doesn’t matter how you plan on using the loan, as long as you have a solid plan in place.
2. Which lender is right for you?
With hundreds upon hundreds of lenders offering a variety of business loan products, there’s no shortage of places to turn when you need funding.
It’s good to know that you have choices, but this can actually make it more difficult to decide where to start.
As you compare a handful of lenders, both local and national, make a list of pros and cons associated with each one. This information should eventually lead you toward the perfect lender.
3. How much money do you want to borrow?
More is not necessarily better when it comes to borrowing money. Once you know how you’ll use the funds, it’s easier to determine exactly how much you need.
You don’t want to borrow less than you require, but at the same time you should never bite off more than you can chew.
4. When do you need the funds?
Some business owners realize that they need to borrow money as soon as possible, while others have a bit of time to think things over.
As a general rule of thumb, start your search for a business loan as soon as you realize it may be a good decision. It’s not an instant process, so it’s likely to take several weeks (or even months) to receive funds.
5. Do you have a plan for repaying the loan?
Although it may be easy to secure a loan, it’s not always as simple to pay the money back. You should have a repayment strategy in mind, all with the idea of knocking out your loan as quickly as possible.
If you don’t take this approach, you could end up with a monthly payment you can’t afford.
The average U.S. small business owner has approximately $195,000 in debt. If you’re concerned about joining them, a business loan may not be right for you at the present time. But, if you’re ready to borrow money to take your company to new heights, it could be time to take action.