Have you ever wanted to start a business or expand your business and you can’t wrap your head around the question, “how do I get started?” what exactly do you need to take you from the “how?” to the “aha!”? let’s look at the role loans played in the growth possibly the startup of such businesses.
Loans are basically available for every type of business out there but not every business goes for the same type of loan. Let’s focus on small businesses for they are the basis of every big company but first, we have to take a look at the most popular types of loans out there. The SBA (small business administration) loan maybe used to add to one’s working capital payment of debt or purchase of inventory or equipment. It is government-guaranteed and it requires low down payment. This type of loan is best for those that are being offered high interest rates or those rejected by banks. One can borrow up to $5million at a low interest of 6.5%.
The term loan is said to be the most popular among small businesses because it allows loans applications from $250,000 to $500,000. Not so high, not so low but the interest remains the same as the SBA loan. Equipment financing is a loan best suited for a person that needs equipment for the company. The loan allows the applicant to receive 100% of the amount of the equipment to be bought. The best part comes in where the payment depends on the lifespan of the actual equipment. The interest that comes with this loan ranges between 8% and 30%.
Business line credit basically works like a credit card only that you receive money every time you are in need of funds. One can get loans up to $1million with an interest ranging between 7% and 25%. smallbusinessloans.co is the best loan for that person who need money for a new business capital or to help fund an existing business. It generally offer amounts up to $35,000 with a 6months – 4years payment time at an interest ranging from 7.9% – 19.9%. I can write about all the types of loans up here but I also need to help you decide which one is best for your small business. Keep in mind there are other small business loans like the invoice financing loan, the short-term loans, the small business start-up loan and many others. You can choose to do more research on the types of small business loans if the information on in this article is not sufficient.
So, what kind of loan are you going to work with? To answer this particular question, you need to take some things into consideration whilst putting other things in order. First off, always borrow what you can afford. Many businesses out there have gone under because of debt that they couldn’t handle to begin with. Make sure you don’t borrow that what you can pay. To help you out, determine your debt service coverage ratio (DSCR) which is basically the ratio of you cashflow to your loan payment. Cash flow here can be monthly or annually, Your take. After doing that, analyze your business performance in order to determine if the loan is going to be profitable after investment or if it’s going to bring about more debt.
Your credit report is an important aspect in loan application because you need to prove yourself to the lenders that you can actually handle their money responsibly. Last but not least go ahead with the application (the appropriate loan of course) making sure you have clean balance sheet, bank statements, invoice statement, business debt schedule, personal tax return and business tax return. Always remember, your business is in your hands therefore research more on making it better and dedicate your time to it. Do this and growth is guaranteed.