If you’re reading this, congratulations! You are part of that noble class of entrepreneurs known as the small business owner. Small businesses account for the majority, or about 55%, of all jobs in the U.S. They also rake in the majority of total U.S. profits per year.
Maybe you’re not quite there yet on the profits part though. And that’s okay. You’re just starting out! You are literally the reason all those fancy funding experts invented small business lending. Small business loans are a great way to get your business started without having to break the bank. More specifically, working capital loans can help you maintain daily operations while you build up a client or customer base. Working capital loans for small businesses are offered by many banks, but not all small business loans are created equal. When researching small business loans, it is important to keep these things in mind:
1.Understand Your Own Business Plan
Believe it or not, this one gets overlooked a lot! Before you start googling willy nilly it is important to understand your total fixed operating costs, the timeline you’ll need to pay vendors, and your expected clientele per month. Only when you know these facts will you be able to make a strong case to a bank about your loan and quote them a needed amount. More importantly, the more planning you do, the more likely your small business will be successful–and the more likely you’ll be able to pay any loans back! Paying back your loans on time is important because your lending bank will report the amount owed to the credit watchdog agencies, and late payments can negatively effect your credit score.
2.Know When You Loan Will Come Through
Some loans take months to be processed, others as little as 24 hours. Make sure to shop around and pick a loan provider with a timeline that meets your individual needs.
3. Compare The Interest Rates
The interest rate, for those of you who fell asleep in math class, refers to money you’ll have to pay at a specified rate either just for the option of borrowing or as a penalty for late payments. If possible, find a lender that only charges late payments related interest rather than default interest, and the lower the interest rate the better. (Although, if you are confident you will never make a late payment, the interest rate may not matter as much to you as much as getting cash fast).
4. Compare The Documentation Involved
Different loan brokers require different proofs of this or that, permits, IDs, etc. If you have some time before your business opens then this documentation might not be an issue for you. However if you’re in a rush to begin and have some gaps in documentation, then a more lenient lender may be the right choice.
Please comment below with lender recommendations! We’re always looking to reward honesty in the banking industry with referrals.