Are you interested in applying for a small business loan? Do you have reason to believe that this could be the best way to improve the finances of your company? Are you hoping to make this decision at some point in the near future?
While there is a lot to learn about small business loans, it’s good to know that there is plenty of information available online. You never have to speak with a live bank representative to gather more details so that you can make the right decision.
Of course, you can’t take action until you know exactly what you are up against. In other words, applying for and receiving funds from this type of loan is easier said than done. There is a lot that goes into securing a loan.
How Do You Qualify?
One of the first things on your mind will be the eligibility requirements of a small business loan.
While every lender is different in regards to what they’re looking for, you need to keep the following in mind:
- Two or more years in business
- A minimum of $100,000 in annual revenue
- A minimum credit score of 620
These are the types of basic eligibility requirements that come into play.
If you have concerns about qualifying, don’t hesitate to consult with more than one lender. This is the only way to better understand where you fit in and if you’ll be able to borrow the money at some point in the future.
What About the Small Business Administration (SBA)?
You may find that a SBA loan is the best option for your business. Here’s what the U.S. Small Business Administration has to say about this:
“The SBA works with lenders to provide loans to small businesses. The agency doesn’t lend money directly to small business owners. Instead, it sets guidelines for loans made by its partnering lenders, community development organizations, and micro-lending institutions. The SBA guarantees these loans will be repaid, which eliminates some risk for the lending partners.”
Depending on your circumstances, you may not qualify for a traditional small business loan but find that you’re able to secure one of these through an SBA loan program.
What are the Benefits of a Small Business Loan?
It’s hard to make a final decision on a small business loan until you first understand the top benefits. There are many of these to consider, including the following:
- Low down payment requirement
- Long repayment terms to ensure a low monthly payment
- Competitive interest rates
- Able to be used for a variety of purposes, such as buying equipment or real estate
These benefits may be more than enough for you to consider applying for and securing the funds from a small business loan.
What are the Downfalls?
Most business owners who have used this type of loan in the past agree that the benefits far outweigh any potential drawbacks.
Even so, you need to consider the fact that a few drawbacks could get in your way at some point in time. Here are several that you should watch for:
- Detailed paperwork, which can take several hours or longer to complete
- Longer approval time when compared to other forms of financing, such as credit cards
- May require collateral
You need to compare these potential downfalls to the benefits, as this is the only way to be confident that you are making the right decision.
Even if you are in a hurry to secure a small business loan, there is never a good time to rush through the process. Just because you qualify for a loan doesn’t necessarily mean you have to take the funds. You shouldn’t do this until you are 100 percent confident in your decision.
Now that you know more about small business loans – including the pros and cons – you should feel better about your knowledge and how to make an informed decision on behalf of your company.
Do you have any experience with a small business loan? Were you happy with your decision, or do you look back and wonder if there was a better option? Will you consider applying for another one of these loans in the future? Share your thoughts and personal experiences in the comment section below. Your feedback can help other business owners decide if this type of loan is right for them.