5 Things to Consider When Choosing a Small Business Lender
Launching your business into its next phase comes with certain levels of risk. Take the time to define your business goals and explore your options. The type of loan you select along with the rates, fees, and terms can affect your bottom line.
A few things to think about before applying for a small business loan:
- How much capital do you need? Much like borrowing on a personal level, you want to ensure that you borrow appropriately for your needs.
- What does your personal credit score look like? It takes time to build business credit, and if you’re just starting out, Lenders will need to rely on your personal score to determine your creditworthiness.
- Is your business showing profit? Solid business financials are a must for any financial institution. While it may be advantageous in certain areas, not showing a positive net gains on your financial statement will hurt your ability to secure funding.
- When was your business established? Many financial institutions have conditions associated with the length of time a business has been open. In fact, most traditional financial institutions have a requirement of at least 2 years. If the business is a start-up or new venture, lenders will do what they can to help secure funds through the Small Business Administration (SBA), or you may have to consider products like business credit cards and personal loans.
- Do you have collateral? It can be difficult to access unsecure loans with little to no business credit. Having collateral available to back the loan could mean the difference between securing funding and having to go without.
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