The Do's and Don'ts of Looking for Small Business Loaning
Are you a new business owner trying to get off the ground or an existing business owner trying to expand? If so, you may be interested in acquiring business loans to help support your company. After all, according to Fundera, only 48% of small businesses overall have their financing needs met. If you don't have a lot of cash on hand or access to venture capital funds, going through business loan companies can help you get ahead. That said, how can you go about looking for small business loan options wisely? Here are some of the do's and don'ts of business loaning.
Do Create a Business Budget
It's important to map out a clear understanding of your prospective company or existing company's financial situation. Don't just go in for a business loan without giving them an understanding of how much it costs to run your business. Instead, include a business plan that lists all your expenses and sources of revenue. Include a future business plan in which you have projected revenue streams and expansion plans. Just make sure that your business budget is realistic and something that applies to the type of loan you're applying for.
Do Check Reviews
All business loan services aren't created equally. As such, see what other clients who also looked for business loaning have to say about the company you're reviewing. Check review sites like Trustpilot, Reddit, and others. They can give insights about what other people thought about their business loan application process and how satisfied they were. It's also a good idea to find out more about the success rate that people have when applying for business loans at the company you're considering.
Do Contact Customer Support
A reputable business loan service should have a customer support team available to you. Contact their customer support and ask them any questions you have about the process. Make note of how accessible the customer support is. How long does it take for people to get back to you if they're not available at the moment? A business loan is a major financial obligation, and you want to ensure you're dealing with a company that can provide transparent and accessible help when needed.
Do Gather Financial Documents
Any business loaning operation will want to see references regarding your financial situation. Make sure you show up thoroughly prepared with your tax returns for the last few years along with bank statements. You may also need to show an expense report of your business expenditure so you can have proof of how much it takes for your current company overhead. You may also need a hard copy of your credit report.
Don't Rely on Just One Lender
Generally speaking, it's never a wise decision to put all your eggs in one basket. Consider shopping around for different business loaning services and see what their different terms are. Check the APR on the loan's interest and see what their success rate is in terms of application approvals and terms. Narrow down your choices to a few different loan operators, and compare their rates along with their terms and other services.
Don't Underestimate Your Expenses
It's a commonly-made, major mistake to underestimate your business expenses. Being realistic about your existing and future business expenses can ensure you keep your business in a healthy condition. After all, you don't want to go into cash flow problems that can make it hard to pay back your loan. Failure to pay back your business loan or reneging on those terms can have dire consequences, especially if you ever want to get more funding one day.
Do Check Your Credit Score
Most people understand that your credit score matters when it comes to applying for personal loans, credit cards, and mortgages. That said, did you know it could also affect your business loan possibilities? Before you start the business loan application process, check your credit report to make sure that everything is up to par. If there's anything on your credit report that stands out negatively, don't be afraid to call the three credit bureaus to take anything off that shouldn't be there. The highest credit score anyone can have is 800, so the closer you get to that number, the better off you'll be.
If you're not satisfied with your existing credit score, you can take the steps to improve it so that you can apply with the highest rating possible. Start by paying off any outstanding debt, and try to make extra payments when you can. Don't apply for any additional debt. Keep checking your credit report until you notice things are being accounted for in terms of your payments.
Do Compare Interest Rates
When it comes to any loan, you should take an extra look at the interest rates. Your interest rates affect how much you'll be paying back over time. Your interest rates are among the main reasons why you should check your credit report to make sure your rating is as high as possible. Your credit rating can benefit you in terms of the amount of interest you'll pay back. For example, with mortgages, you may have an interest rate as high as 7% or as low as 3%, depending on your credit score. You may have the same fluctuation with certain loan companies, but some of them may simply have a fixed interest rate.
Don't Forget the Fine Print
Getting approved for your first business loan or a loan that allows expansion can be a very exciting time. However, you shouldn't let yourself forget to read the fine print. Remember, a business loan is a binding contract, and you want to make sure that you understand everything in and out. Read it over and note any questions you have about the terms. Make sure you talk with your business loan agent, their customer service, as well as your own business, tax, and legal professionals for advice. You don't want to sign a business loan document that'll end up doing you more harm than good.
Don't Borrow What You Can't Pay Back
You must be as responsible with business loaning as you are with personal loaning. Don't borrow what you can't reasonably pay back. You may get approved for a business loan that's more than what you initially thought you would get, but it's important to be realistic about what your current revenue is and what a reasonable future projection may be. After all, you don't want to put yourself in a situation where you're constantly breaking even or in the red on your business because you can't afford to pay back your debts. Don't give your future self a hard time. Look out for yourself and your business with careful planning.
Having access to various sources of capital like trustworthy business loan companies is essential to helping your small business develop no matter what stage you're at. If you're a small business owner or small corporation that's just starting or planning to expand, you need enough money behind you to see your business goals realized. With the right preparation and a realistic outlook, you can secure business loaning to help your company grow. For a reputable and honorable business loan provider that you can trust, contact our team at Chemung Canal Trust Company today for a consultation.