It can be overwhelming to search for a loan online. There are a ton of information to go through and you might be intimidated or not know where to start. If you need a small business loan and are considering starting your research online, use the guide below to help streamline your search.
Step 1: Decide How Much You Need
Before you start to look for loan options online, you need to first think about the size of the loan that you will need. Ask yourself the following questions:
- What are you using the loan for?
- How much do you need to make it happen?
- Is the number flexible?
- If a lender offered you more would you take it?
- If a lender was not able to offer you the full amount, will half of that amount still be enough?
On several instances, there are businesses that do not qualify for the full amount they want. Make sure you know going in whether that will be a deal breaker or not.
Step 2: Make Sure You Can Afford It
After you know how much funding you need, you need to be certain that you can afford it. Since it is your first time applying for a loan, you have no idea what your interest rates or terms will be. This is another question you will have to ask yourself again.
To determine if you can afford the loan, take a look at your cash flow and be able to say that you will be able to afford a large loan payment every month. If you see that this expense could hurt your business, you should wait to apply when your cash flow is stronger. Falling behind on payments because you cannot afford it can really hurt your personal credit score and credit history.
Step 3: Look at Your Credit Report
Your personal credit history is a very important factor in the application process for a business loan. You should have an idea of what your credit report looks like as lenders will it when they verify your credit score and pull a copy of your credit report.
It is recommended that you pull your credit report so that you can see what your credit score is and to make sure that all the information on it is correct. Mistakes on credit reports are common and you do not want an error affecting your credit report. It is common that people find mistakes on their credit reports so make sure you review it so your credit score is not affected.
Step 4: Compile the Information You Need
In order to save time during the application process, you should prepare the documents you will need beforehand. All lenders are different but there are some common requests that lenders will ask for:
- Business bank account statements
- Personal and business tax returns
- Balance sheets
- Income statements
- Legal documents (commercial lease and articles of incorporation)
Many of these documents you might have easy access to but if not then be sure to get those ahead of tome is you will be ready if lenders ask.
Step 5: Research
Next is time to figure out where you want to start those loan applications. The process will be much quicker by being prepared with the documents listed above.
When doing your research, here is a list of questions you should ask to see which is the best fit for your business:
- Are there industries you do not work with?
- Am I able to use the funds for anything? Or are there specific purposes?
- What is the minimum credit score you work with?
- How often are loans paid back? Daily? Weekly? Monthly?
- What is your maximum and minimum loan term?
- How long does the process take?
- What is your lowest start rate?
Ask all of these questions so that you get an idea of whether or not this lender will be a good match for you and if they have the type of loan products you need.
Step 6: Apply and Compare
It is prudent to apply for different loan options so you can see where you are going to get the best offer. You need to ask all the lenders to calculate their costs into APR. Looking at loan products’ APRs will help you compare them. Also, ask if there are any pre-payment penalties. Some lenders will charge you a fee if you pay off your loan early.
The Bottom Line
By completing the steps above, you are well on your way to getting your business loan. You need to take the time to carefully identify that the loans is the best course of action for your business and that you are getting the best deal out there. Remember to be prepared with what you bring to the table. This is the easiest way to streamline your search.