How to get the right type of business loan
To run a successful business, you need money, getting the right information will help in accessing money faster. There are different funding of which loan is part of them. Every loan have their own terms and condition which you have read and understand well before you apprehend your signature.
Once you know how much you need and what you want to use it for, the next step in how to get a loan for your business is to decide which type of loan you need. There are many options available, but they may not all make sense for your business needs.
Consider a term loan. Whether you need access to just a thousand naira or in millions, a term loan could make sense for your small business. If you have a mortgage or have ever taken out an auto loan, you might feel right at home with a term loan.
You receive a lump-sum amount of money upfront and make scheduled payments over the duration of the loan. These loan amounts can be high and therefore are relevant if you are looking to expand your business rather than just cover your cash flow needs.
The funds are provided in a lump-sum amount and the amount plus interest are repaid over the duration of the loan.
Line of credit
A line of credit gives you flexible access to capital and is attractive if you don’t need to use all of the financing at once. You are given access to a given amount, which could fall in a similar range of a term loan. But, with a line of credit, you only access the funds as the need arises, which means you only pay interest on the funds you use.
Small Business Administration (SBA) loan
You might also consider how to get a small business loan backed by the Small Business Administration, or an SBA loan such as those offered by select banks. The plus side is that you are likely to fetch an attractive interest rate and generous repayment requirements. On the other hand, if you need the cash in a hurry, you will find yourself waiting because these loans can take weeks to be completed.
The lending standards are also generally more stringent than average. If you’re wondering how to get a business loan in the range of #300,000 to several million, an SBA loan could be for you.
Picking a lender
Small businesses like yours are increasingly capitalizing on the opportunity to access a loan via online lenders. If you’ve ever asked “how hard is it to get a small loan?
You have no shortage of options when it comes to choosing a small business loan.
When it comes to following best practices for how to get a small business loan, you should make sure that you’re prepared with the relevant documentation before applying for funding. While the precise paperwork that you need will vary depending on the lender, it’s better to be prepared than losing time collecting additional documentation. Here are some of the documents you can expect to use:
- Tax returns for the last three years.
- Financial statements including current Profit & Loss statement.
- Business plan with forward projections for profits and expenses.
- Three months’ worth of checking account statements.
Certain loans such as equipment loans often lend themselves to collateral so that the lender inherits less risk. If you’re building a credit history, consider being prepared to offer some collateral whether business or personal to get a loan for your business.
Are you thinking of getting a loan for your business, make sure you read the terms and conditions well and you are sure about your repayment plan. A loan can help in scaling up your business and a loan can help in bringing down your business.
Weigh your options right.