Considering your small business lending options?
Taking out a small business loan can be an amazing way to advance an existing business. It can also be a great way to jumpstart a new venture grow something you’ve been working on into a full-time gig.
The problem is, many entrepreneurs don’t know where to start. They wonder what goes into getting a small business loan, and what factors need to be considered before signing on the dotted line.
Here’s a guide on getting a small business loan and your options going forward.
Determine Your Needs
As Stephen Covey said, effective people (and entrepreneurs) “begin with the end in mind.” This is important when considering small business lending. You’re effectively deciding what taking out a small business loan will do for your business and where it will help you end up.
No matter the size of your company or how many owners it has, a sit down of sorts needs to happen. Write out or brainstorm the ideal outcome that will happen with the infusion of new cash. Also, be sure to weigh the pros and cons to determine if a small business loan is the right option.
This is step one for a reason. Forced to get clear, you might find out you need less (or perhaps even more) money than you think. Being intentional sets the rest of the steps up to be successful.
Establish a Budget
Business budgeting is key for any small business. But knowing your numbers is absolutely essential if you’re considering small business lending. It’s another area you should understand well before signing for a business loan.
What’s your budget look like? Are there areas you could free up cash to fund your new endeavor? And are you making enough money now for this to work long-term?
Credit is a useful tool for taking out a small business loan, but you definitely want to have cash in hand.
Also, be aware that business loans can affect your credit.
If you have good credit, that’s no problem. But establishing a budget and knowing your numbers is especially important if your credit isn’t great. Having some cash on hand may be more likely to obtain the loan.
Determine the Type of Loan
There are several types of small business lending options. The option you choose should match your business goals.
The types of business loans include:
- Equipment financing
- Business credit cards/lines of credit
- Small Business Association (SBA) Loans
- Personal small business loans
- Short-term small business loans
- Merchant cash advance
- Commercial mortgage
And more. Do adequate research on your lending options.
Be Sure You Qualify
Are you sure you qualify for the type of loan you need? Do some additional research to make sure.
Once you’ve done this, it’s time to gather up the documents.
When you apply for small business loans, you need access to a bunch of different information. Small business lending definitely involves paperwork. The more prepared you are, the better.
The documents you’ll need include:
- Business/personal bank statements
- Business and personal tax returns
- Financial documents
- Any additional legal documents
- A comprehensive business plan
Most places require the same information, so print out several copies or save all the documents in one place on your computer for easy referencing.
Apply!
You’re ready to apply for a loan!
Community banks are a great first option because of their local decision-making and the ability to be more flexible with terms. Signature Bank of Georgia is a Preferred Lender with the SBA and is a great place for you to start.
Don’t Overcommit
Unfortunately, not all banks are alike with their lending practices. When your banker isn’t a partner in the process, people can get into trouble for taking out loans they should’ve never been handed in the first place.
All this to say, be sure that the deal you’re getting is something you can afford.
Here are a few good rules of thumb to live by so you don’t overcommit:
- Aim for reasonable monthly payments
- Look at the life of the loan and how long it will take to pay off
- Aim for the lowest interest rates possible
- Consider how, best-case scenario, you would pay the loan off early
- Consider how, worst-case scenario, things could go south with your business
Get to know your banker. Trust is key.
Getting Started with Small Business Lending
So, are you ready to get started with small business lending?
On the front end, a little preparation goes a long way. Knowing your numbers, getting clear on what the money’s for, and getting your paperwork in order can make the process much easier.
Once you’re ready, contact us. We would be happy to review your request and make recommendations for the best possible outcome.
Learn more about our small business banking options today!
