Whether you need a quick cash boost or a long-term loan, knowing how to get a loan is key to your small business’s success. But before you start filling out the paperwork, take a look at what these business execs learned during the process. Their tips might just help you land the financing your business needs to thrive.
What Business Owners Wished They Knew When Getting a Loan
1. Have a business plan
When getting a business loan, there are many aspects to consider, and one of them is to have a thorough business plan. At the time of application I did not have as many details worked out as the lender was expecting. These details can either make or break your case, and can be crucial for the lender’s final decision on the loan. Had I known this before, I would have qualified to get a better amount for my business and made more profits out of this investment.
-Bishal Biswas, CEO at Word Finder
2. Have a payback plan
Receiving the loan supported me with business growth and marketing. What I did not prepare for was how to double the investment. I think having a plan of increase and use of funds is important. It would help with financial growth and understanding how to leverage the investment before receiving it.
3. Shop different loan types
Do not just stick to one type of loan, always look for alternatives that can provide you with lower interest rates, flexible repayment periods, and easy borrowing requirements. Nowadays, there are various sources from which you can seek funding. For example, government-backed loans have less stringent requirements, require smaller down payments and have flexible income requirements as compared to the loans offered by private lenders. It is recommended that you should do your homework before jumping to any conclusion. Moreover, make sure you don’t have to pay any hidden charges.
-Alex Williams, CFO of FindThisBest
4. Don’t do it alone
Sometimes you believe yourself to be too qualified for something. I did the same and thought how difficult would it be to get a loan approved. I did not seek any expert’s advice and decided to do it all on my own. As a result, I missed out on minor details that negatively affected my application. Lenders also see if you seek professional advice for the application to check how prepared or serious you are about the process.
-Jeff Johnson, Owner and Acquisition Manager at Simple Homebuyers
5. Know what you can afford
People always misunderstand the word ‘afford.’ Just because you are able to pay back the monthly payments, doesn’t mean that you can actually afford the loan. The total amount you end up paying back is a lot more than you imagined. The future is uncertain, and any emergency need can make you miss a monthly payment, putting you in trouble with the bank. I would recommend borrowers to go over the finances and operations of their business to figure out if they would actually be able to make timely payments.
-Sue Hirst, Co-founder and Managing Director CFO On Call
6. Review your credit score before applying
If you are someone who is seeking funding for their business in the near future, maintain your credit score. It is one of the most important requirements when it comes to borrowing. Normally, the higher the credit score, the lower the interest rate. For example, a credit score above 700 is considered very good, and you can secure a loan at a lower interest rate. Moreover, always study your credit reports six months prior to applying for a loan and identify mistakes if any. I failed to understand this, and when I submitted credit score reports, it had some minor errors in it. It created a hurdle for me during the loan borrowing process.
-Perry Zheng, CEO and Founder of Cash Flow Portal
7. Consider a personal guarantee
After taking out my most recent loan, I was made aware that better loans can be availed by offering personal or collateral guarantees. This information would have been very helpful to me beforehand as I needed to invest heavily in my new business plan. It has a potentially riskier downside to it as well. If an individual fails to pay back the loan in the set time frame, the bank can seize their property to recoup the amount. Yes, it is very risky, but business involves such risks, and it could certainly pay off in the long run.
-Gaurav Dhir, Founder of Lights Pick
8. Review the fine print
The Fine Print usually includes complex details and restrictions of the loan, including vital terms that may be difficult to understand if you're not well versed. If you're unsure of your grasp over the document, ask for professional advice from an investor or a mentor to prevent any mistakes that may arise due to your lack of experience.
-Kevin Mercier, Founder at Kevmrc.com