Questions to Ask Yourself When Applying for a Loan

If you are thinking about applying for working capital for your small business, you will want to know the best application tips so your small business will have the financing it needs to grow in no time. It will give you peace of mind if you learn how to get a small business loan or merchant cash advance. Be sure that you do not rush into an agreement because you might regret it. Educate yourself on the lender’s credibility, payback rates, and products before you complete your small business loan application.

Learn how to get a small business loan with these three tips:

Is the loan more money than what you need?

Determine how much money your small business requires first before applying for a small business loan. Refine your business plan and decide how you will utilize a loan. If you apply and find that you are approved, the lender will tell you the amount you have been approved for. If you feel that it is too much money you should say something about it. A responsible lender will ensure that your small business can handle the loan and that it fits your needs.

Can you handle this repayment schedule?

Besides the funding amount, you need to make sure your business can pay back the loan in the amount of time the lender approves you for. If your business cannot handle the payment schedule, let the lender know upfront so that you can potentially work together to come up with a different solution.

If your potential lender requires a daily or weekly payment schedule, it’s important to make sure your business has consistent cash flow throughout the month. This type of payment schedule might not be a good choice for businesses that rely on a month-end influx of cash flow to maintain business operations or on infrequent inward deposits.

Will you be stacking loans?

If you have taken out a small business loan in the past and are still in the process of paying it back, you are at risk of “loan stacking”. Stacking is a commonly used word in finance which simply means you have an existing loan and receive another loan from a different lender while in the process of repaying your original loan. This could cause issues for your small business and both lenders, so be wary of taking out an additional loan until your first loan is paid off.

Alternative financing is great but only if you are working a quality small business lender that will provide you with the funding amount your business needs. Take the tips above into consideration while learning how to apply for a small business loan and you will be more likely to find a loan that fits the requirements that your business needs.

Do they lend to businesses in your industry?

Many lenders specialize in working within specific industries or have identified industries that they do not work with. Ask them early on so that you avoid wasting time with a lender that will not be able to help you regardless of your creditworthiness.

The Bottom Line

You will learn that there is more than one option available to you when you are looking for a small business loan and some will be a better fit than others. You can look for a loan that will be a good option for your particular business situation.