How to Apply for a Loan and Get Your Business Started

By , in Economy News on .

One of the more significant challenges most people face when starting a new business is getting funding. Some people may have savings aside and decide that personally financing their venture is the best method for embarking on their business right away. For others, it would require getting support from various sources that include family and friends. One of the traditional techniques that are often utilized is business loans. One of the most significant advantages of business loans is that should the company goes bankrupt, the owner is not expected to pay back the loan. Instead, the funds are returned, whether partial or full, through the liquidation of the business. There are other ways to acquire funding, such as through angel investors or crowdfunding campaigns. Also, you can apply at and receive the amount of funding you need for your enterprise.

While lending standards have become stricter through time, being prepared way ahead and knowing the factors involved in applying for a loan can help facilitate your application approval and get your business running.

Determine the kind of loan you need

It is typical for lenders to ask what you are using the loan for. When it comes to starting a business, bank loans may not be your best option because of the cash flow required to pay off the loan. You may also need funding to allow your business to grow even more or for the salaries that you need to pay your employees. When you are just starting a business, you are more inclined to get funds from credit cards, friends, or crowdfunding. If you have been running your business for over a year, you have more financing options available to you.

Study your funding options

If you need funding right away but do not have any collateral to show for it, you may want to try online lenders. You are required to provide some of your personal information such as your social security number and address, plus other details depending on the lender you are dealing with. The advantage of online lending is that you get to know right away whether or not your loan is approved, the payment terms, and the amount of money you can borrow. They also offer lower interest rates than banks partly because they do not have to worry about banks’ overhead costs. Bank loans are an option when you can provide collateral and have good credit. They are also good if you are not in a rush to get your business started.

Prepare necessary documents for application

Once you have determined your lender, make sure that all of your documents are in order. These would include your business plan, bank statements, financial statements, tax returns, and other records your lender should require. If you are qualified for several loans, it is best to choose the one offering the lowest APR (Annual Percentage Rate).

It is necessary to go through these steps to make things easier for you. The time and effort you put into studying your options carefully will help you acquire your new business funding.

As our second lead editor, Anna C. Mackinno provides guidance on the stories Great Lakes Ledger reporters cover. She has been instrumental in making sure the content on the site is clear and accurate for our readers. If you see a particularly clever title, you can likely thank Anna. Anna received a BA and and MA from Fordham University.