Applying for a Small Business Loan in 6 Steps
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1. What Is Your Business Loan For?
Startup costs Expanding a business Managing cash flow and day-to-day expenses Purchasing property for the business Buying equipment or inventory
What Do Small Business Startups Need to Think About?
Leasing property Inventory Supplies Equipment Utility costs Marketing Insurance Payroll Permits Legal fees Accounting Website Remodeling/repairs Advertising
Expanding Your Business to Reach Your Goals
Leasing or purchasing more property Expanding your inventory Increasing payroll Purchasing more equipment New marketing campaigns
Managing Cash Flow When It Fluctuates
Purchasing Property Is a Big Step
Buying Equipment and Inventory
2. Calculating the Amount of Capital Needed
One-time purchases or ongoing: One-time major purchases, like equipment or real estate, are often large expenses that can disrupt cash flow. Ongoing expenses are costs that happen monthly, quarterly, or annually, and don’t change much. Essential and urgent, or optional: Essential operational expenses are typically prioritized over optional expenses. Consider the urgency of what you want to purchase and if it contributes to an essential function of your business: can the business operate without it? Fixed expenses: When you run your business, you’ll have fixed expenses that don’t change (or would change relatively infrequently). These may be rent, certain utilities, insurance costs, or regular business services. Consider what your business loan may need to cover and make adjustments to your desired loan amount accordingly.
Estimating Cash Flow
3. Common Eligibility Requirements for Business Loans?
Credit scores Business age Revenue history Debt-to-income ratio Cash flow
Lenders Want to Know Your Credit Score
Building Business Credit
Separating your business finances from your personal finances by: Getting an Employer Identification Number (EIN). Maintaining a business bank account that is separate from your personal account. Opening a business credit card and/or business line of credit and making payments on-time. Working with vendors and suppliers who will report your payments to the business credit bureaus; whenever possible, it can help to pay what you owe early. Checking your personal and business credit reports annually. Any fraudulent or erroneous activity could negatively impact your business credit score. Personal credit scores can be accessed at no charge annually. Accessing your business credit report may cost a fee, depending on the bureau.
Is Your Business Established?
Revenue History Matters
Knowing Your Debt-to-Income Ratio (DTI)
Is Your Cash Flow Sufficient?
4. Choosing the Right Loan for Your Business
Small Business Administration (SBA) Loans
Business Line of Credit
Invoice Factoring and Financing
Commercial Real Estate Loans
5. Compare Types of Lenders for Small Business Loans
Fast application review, typically in a matter of hours or days Quick access to funds (if approved) Compared to more traditional lenders, it can be easier to qualify for if you have little business credit or history Easily compare several different lenders Options for unsecured loans, which don’t require collateral Offer other types of financial products
Peer-to-Peer (P2P) Lending Networks
6. Gather Documents
Business and personal bank statements Business and personal tax returns Business legal documents, if applicable (lease or franchise agreement, articles of incorporation, business licenses, permits) Personal identification and current resume Business plan Revenue statements Accounts receivable and accounts payable
Compare Small Business Loans and Lenders
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