Before you start the process of applying for a business loan, give some thought to your overall business finances and business goals. Ask yourself the following questions:
What do you need this business loan to accomplish for your company? Be clear about why you are looking to borrow this money for your business. Depending on your goals, you might want to choose a different kind of small-business loan.
Do you need money for short-term needs like buying inventory, making payroll, hiring employees, or meeting seasonal demand? If so, you might want to get a business line of credit for everyday working capital and short-term spending.
Do you want to borrow for long-term goals like expanding your operations, developing a new product, upgrading your facilities, buying business equipment, or other investments in long-term growth? In that case, you might want to get a business term loan, business equipment loan, or other longer-term loan to meet your specific goals.
Do you have any other personal funds that you can use to grow your business? What happens if you don’t qualify for a business loan? Do you have any personal savings, personal credit cards, personal loans, or can you get loans or investments from friends and family? Make sure you are using all of the resources available to you.
Is your business documentation ready? If you apply for a business loan, you will need to show a lot of documentation to the bank or lender, such as:
- Business plan
- Profit & loss statements
- Previous years’ tax returns (business and personal)
- Articles of organization or incorporation (if you have formed an LLC or other legal business entity)
- Business licenses
Make sure you have your documentation ready to go before you apply.