In starting up businesses, whether on a small scale or large scale, business owners usually require loans from financial institutions. Financial institutions in the United States are however ready to grant loans as long as the requirements are met.
STEPS TO TAKE WHEN APPLYING FOR A LOAN
- Determine if you are eligible for a business loan
- Discover the type of loan you need
- Differentiate between micro business lenders
- Assemble the necessary documents
- Put in for a business loan
Here’s a breakdown of the steps mentioned above:
1. Determine if you are eligible for a business loan
To help solve this, the following questions needs to be answered:
How credible is your credit score?
Your credit score is one major criterion for determining your loan eligibility. It can be gotten for free from either Equifax, TransUnion or Experian or even, from several credit issuers and personal finance websites. The better your credit score, the more lenders would want to give you a loan.
How far have you gone in business?
How long you have been in business also needs to be considered before a loan is granted. To qualify for most online small-business loans, you need to have been in business at least one year while for most bank loans, at least two years.
How much money do you make?
Your annual revenue may determine if you qualify for a loan. This may range from $50,000 to $250, 000 depending on the lender.
Can you keep to rates?
Make sure the loan you’re applying for is something you can pay back with ease to avoid the pressure that comes with not meeting the payment date.
What collateral do you have?
A property or equipment may be required as a collateral by the lender to give them an assurance of what to come after if you do not meet up to your loan repayment.
2. Determine the type of loan you need
The next stage is deciding what type of loan you need. Lenders will need to know why you need a business loan. Is it to start up a new business? To manage the day to day expenses of an ongoing business? Or to grow your business? Individuals who are in their first year of a business may find it difficult to get a business loan because lenders require cash flow to support repayment of the loan.
Loans for managing the day to day expenses of a business lets you cover expenses like payroll and unexpected costs.
Loans for growing your business may be to meet some specific needs in a growing company such as for equipment, stock or vehicle purchases.
3. Differentiate between micro business lenders
Comparing available business lenders comes next. You can get a loan from an online lender or a bank.
Online lenders provide small-business loans and lines of credit from about $1,000 to $5 million. The average annual percentage rate on these loans ranges from 6% to 99%, depending on the lender, the type and size of the loan, the length of the repayment term, the borrower’s credit history and whether a collateral is required. It’s easier to get loans from online lenders when you lack collateral, lack time in business, need funding quickly or do not meet the requirements of a bank.
You can get loans from banks if you’ve been in business for at least two years, have a good credit score and you don’t need cash fast. While getting a loan from micro lenders is possible if you are a new business, you can’t get a traditional loan or you have bad credit or no credit history at all.
4. Assemble your documents
The next step is to gather all the required documents. Some of the documents required may include; business and personal tax returns, business and personal bank statements, business financial statements, business legal documents and business plans.
5. Apply for the loan
Once you’ve determined the type of loan right for you with all the documents in check, you can then apply for a business loan. Of the loans you qualify for, you may choose the one with the Lowest Annual Percentage Rate (APR) – which refers to the annual rate of interest charged to borrowers and paid to lenders, as long as you’re able to handle the regular payments.
We have looked at the five general steps needed to be taken before a loan is being applied for in the United States and usually in other parts of the world. Other steps not mentioned here may however be required by a lender. Make sure to check with your lender.
In starting up businesses, whether on a small scale or large scale, business owners usually require loans from financial institutions. Financial institutions in the United States are however ready to grant loans as long as the requirements are met.
STEPS TO TAKE WHEN APPLYING FOR A LOAN
Here’s a breakdown of the steps mentioned above:
1. Determine if you are eligible for a business loan
To help solve this, the following questions needs to be answered:
How credible is your credit score?
Your credit score is one major criterion for determining your loan eligibility. It can be gotten for free from either Equifax, TransUnion or Experian or even, from several credit issuers and personal finance websites. The better your credit score, the more lenders would want to give you a loan.
How far have you gone in business?
How long you have been in business also needs to be considered before a loan is granted. To qualify for most online small-business loans, you need to have been in business at least one year while for most bank loans, at least two years.
How much money do you make?
Your annual revenue may determine if you qualify for a loan. This may range from $50,000 to $250, 000 depending on the lender.
Can you keep to rates?
Make sure the loan you’re applying for is something you can pay back with ease to avoid the pressure that comes with not meeting the payment date.
What collateral do you have?
A property or equipment may be required as a collateral by the lender to give them an assurance of what to come after if you do not meet up to your loan repayment.
2. Determine the type of loan you need
The next stage is deciding what type of loan you need. Lenders will need to know why you need a business loan. Is it to start up a new business? To manage the day to day expenses of an ongoing business? Or to grow your business? Individuals who are in their first year of a business may find it difficult to get a business loan because lenders require cash flow to support repayment of the loan.
Loans for managing the day to day expenses of a business lets you cover expenses like payroll and unexpected costs.
Loans for growing your business may be to meet some specific needs in a growing company such as for equipment, stock or vehicle purchases.
3. Differentiate between micro business lenders
Comparing available business lenders comes next. You can get a loan from an online lender or a bank.
Online lenders provide small-business loans and lines of credit from about $1,000 to $5 million. The average annual percentage rate on these loans ranges from 6% to 99%, depending on the lender, the type and size of the loan, the length of the repayment term, the borrower’s credit history and whether a collateral is required. It’s easier to get loans from online lenders when you lack collateral, lack time in business, need funding quickly or do not meet the requirements of a bank.
You can get loans from banks if you’ve been in business for at least two years, have a good credit score and you don’t need cash fast. While getting a loan from micro lenders is possible if you are a new business, you can’t get a traditional loan or you have bad credit or no credit history at all.
4. Assemble your documents
The next step is to gather all the required documents. Some of the documents required may include; business and personal tax returns, business and personal bank statements, business financial statements, business legal documents and business plans.
5. Apply for the loan
Once you’ve determined the type of loan right for you with all the documents in check, you can then apply for a business loan. Of the loans you qualify for, you may choose the one with the Lowest Annual Percentage Rate (APR) – which refers to the annual rate of interest charged to borrowers and paid to lenders, as long as you’re able to handle the regular payments.
We have looked at the five general steps needed to be taken before a loan is being applied for in the United States and usually in other parts of the world. Other steps not mentioned here may however be required by a lender. Make sure to check with your lender.
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