Guide To Loan Options For Your Small Business

November 20, 2016 10:56 pm1 commentViews: 102

By : Stacey Cooper

Here’s how to work with lenders to get the funding your small business needs …

loanguide1The beginning is the most fragile part in the life of every living being. If it doesn’t get proper attention and treatment, it won’t make it through that initial period. The same goes for a newly established small business. Business owners need to ensure that this new enterprise is nurtured with the greatest care, so as to raise it to become a self-standing business. Since the majority of small and medium business owners don’t own enough assets to meet all the financial requirements of a small business, they have to turn to loans. While loans are sometimes perceived as a risky enterprise, if they are used in a reasonable way, they can help your business enterprise succeed.

Smart loans for initial funding

First of all, it’s important to know that loans have always been a legitimate and efficient way of financing businesses. Thousands of businesses use loans, since they’re the easiest means by which to accomplish your goals without anybody else interfering in your business deals. Still, every loan requires caution and thorough preparedness, which is why you should stick with the following points:

Make a business plan: whether you decide to get in touch with a bank or a private lender, it’s always better to have a ready-made business plan. Otherwise, you’ll have to dodge some questions and won’t be able to present your request for financial assistance in a credible way.

●Stay disciplined: every lender is going to check your financial credibility. Therefore, credit score needs to be improved before you arrange a meeting with a lender. The higher your credit score is, the more of a financial risk you will be perceived by lender as being – and they will be less inclined to offer you the loan you are requesting.

●Don’t borrow too much: you shouldn’t use your business loan to cover your private expenses. The loan should match, to the penny, the financial demands of your business plan.

Every loan can backfire; but more often than not, the reason is that the borrowers fail to meet the lender’s contractual terms. If you use the loan wisely, the lenders can be your greatest business ally.

Avoiding fraudsters

A business person in need is a perfect target for various scams. You should know that there are many fraudsters out there, waiting to give “a loan” to struggling business owners. The rule of thumb for avoiding such tricksters is that you should never fall for people who ask for advance payments before anything else. For instance, if a lender asks you to make a down payment before you’ve signed a contract with them, it’s a red-flag sign that something is wrong with that arrangement. Down payments are made after the deal is closed.

Furthermore, when a potential lender warns you that your credit score needs some tweaking and offers to do it on your behalf, this is another red-flag sign that they’re up to no good. If you need such a service, allow only well-known companies to do that on your behalf.LoanGuide2

Because of the potential risks of fraud, you should always check if that company exists. Although this might seem like an obvious thing to do, many business rookies get overwhelmed by their first business (ad)venture, and simply forget to inquire about such basic things.

A wide range of lending institutions

The times when banks were the main authority in the field of loans are behind us. This is due to two main reasons. First, the reputation of banks has been damaged as a result of their role in the financial scandals since 2008; and second, the Internet has yielded faster lending options, which banks can’t follow.

However, it’s far from the truth that banks aren’t important financial players. They still dictate trends and exercise influence on the economy. So, you can still try to get a loan from a bank. Doing so will require dozens of documents and financial reports – and the process will take a lot of time. Nevertheless, if you need a larger sum of money – say $50,000 and more – going to a bank is still a reasonable option.

On the other hand, smaller loans can be obtained through alternative lenders. The entire process will be less complicated, and your assets will be approved much faster. Additionally, you will get familiar with invoice financing innovations, so as to learn how to make funding solutions work for your business.

No matter what option you choose, you should always check the reputation of your potential lenders and their former clients. This will give you a better insight into their work and prevent you from making hasty decisions that could put your business in financial peril. A cautious and detail-oriented attitude to loans and lenders will ensure that you have a bright business future.


Stacey Cooper is a business consultant and a contributor on site Stacey is interested to keep up with new ideas from the small business world, finance, and marketing.


1 Comment

  • Indeed, every loan requires caution and thorough preparedness, which is why one should follow the suggested points.

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