A small business could refer to any type of loan provided to owners of small businesses for various purposes by a lender. These loans may have less restrictive requirements, enabling the small business to secure the funds more efficiently. They are helpful for businesses who are wanting to kick start their new business or grow their existing business. A small business loan can prove to be beneficial by providing other incentives for the lendee, which could reduce total business expenditure. These loans can be provided for by either a financial institute such as bank or private lenders.
How does a small business loan work?
A loan is an agreement between two parties, the lender and the lendee (business owner) that the loan will be paid back in a set period if time with interest. It is important that small business owners are well informed of the terms of the loan, most notable the interest rate.
Does your business qualify for a small business loan?
Most financial institutions and private lending companies will research a little further upon deciding if they are willing to go ahead with loan approval. This is to ensure that the transaction is accounted for, repayments can be met and the intent is genuine.
To know if your business qualifies, here is a brief list of the essential requirements:
- Calculate your personal and business credit scores - this will allow you to betterevaluate your ability to repay all your personal debts that may be accruing. Have this visible to the lender so they can understand the situation
- Business plan - yes, lenders need to see any business plans to assess the application. A strong well planned one, will give you more leverage to be successful in receiving your small business loan
- Know what the lender requires - if you meet the minimum qualifications and requirements you are more likely to be given a loan than someone who doesn't. Read up on these requirements and aim to meet most if not all to be a successful applicant
- Collateral - this means anything that you own that is an asset to your small business. Having collateral will provide security when applying for a loan, and in the case of not being able to repay it, the lenders can seize and sell the asset to be able to make the repayments.
Organise legal and financial documents - be sure to have all these documents ready with you at all times. Documents such as, tax returns, balance sheets, bank statements and personal identification are just a few of the documents that lenders will need to assess your eligibility.
If you’re a small business owner seeking a loan, or you want to find out more, the highly qualified and highly experienced team at IGM Group is ready to assist.
Contact us to find out how we can help you.