How to Find the Right SMB Loans for Your Business
During those critical early months of starting your own business, when everything is go and it feels like there simply aren't enough hours in the day, the most pressing concerns are often related to cash flow. For the majority of small-and-medium-sized enterprises, a business loan is something that every entrepreneur will have to consider at some point.
Whatever industry you're dealing with, there is likely to be countless options for loan packages from a variety of reputable and perhaps not-so-reputable lenders. It can be difficult to cut through all of the noise and find the right loan that is perfect for the needs of your growing business. Not to worry, here we've compiled a comprehensive guide on how to find the right loan for your business, whatever your needs might be.
What Size Loan Do You Need?
Even when looking at a large number of similar-sized businesses, the financial and cash-flow requirements of each can vary considerably. The right sized loan for you will be dictated by a number of factors; what stage are you in setting up? Is the money for a series of one-time resource purchases or for long-term liquidity? Are you looking to buy commercial property for your business or rent? The list goes on, and all of these considerations will impact the size of the loan you should get.
Remember that bigger is not always better. While a larger-sized loan (typically upwards of $10,000) usually carries with it more generous repayment terms related to interest and repayment schedules, you will still ultimately be saddled with a larger amount of debt. A smaller loan might come with greater risks attached, but if your cash needs are related to individual purchases then a smaller loan is almost definitely the right one for you.
The first thing any business owner should do before approaching a lender is to fully calculate and cost the exact amount of funds needed to reach the next stage of your business plan, but always remember that a little bit of extra money on top is much better than not borrowing enough and having to reach out for another loan.
How Quickly Do You Need the Money?
This is an important consideration that relates largely to the kinds of repayments you're willing and able to take on. As mentioned, a larger loan tends to come with more merciful repayment rules, no matter what lender you're borrowing from. The same applies to loans with less pressing timescales.
If you require the money within a couple of days, lenders will pick up on that urgency and attach higher interest rates in order to protect themselves. There is a wealth of financial advice for SMB loans available for newcomers who are concerned about getting a bad deal, so read up beforehand. A loan that can be transferred over a longer period of time, preferably with spaced out instalments to the borrower, is more likely to come with relaxed terms. Think wisely and be patient when considering your SMB loans options. Establishing a detailed timescale for cash instalments before you approach a lender is one of the earliest steps that any business owner should take.
What Do You Need the Money For?
How exactly you plan to spend your loan will dictate the size, length and type of lender you should go for. If the money is for one-off purchases of equipment or resources such as office space, appliances or licensing fees, then you'll need a loan which caters to that, with a speedy turnaround and straightforward repayment system.
If your loans are to recover ongoing and routine expenses such as wages or rent, then you might want to consider opting for a different type of loan, such as a business credit card or establishing a line of credit. There are literally thousands of different types of loan options and making sure that you select one which adequately covers the outgoings of your business is crucial.
Finding the Right Lender
As well as determining the correct type of loan for your business, the right lender can make all of the difference. Different lenders exist for different types of businesses, and you should always check what kind of smb loans are currently provided by the government and by NGOs and advocacy groups before checking loans provided by banks and funds. Loans provided by the former category are usually done so in order to help businesses grow in local economies, and will always have more generous costs and terms than a loan provided by a bank.
Furthermore, certain loans exist specifically for certain types of businesses. If you're launching a small-scale tech start-up, there are plenty of loan packages structured around the typical needs of such enterprises. The same goes for restaurants, finance outfits, charities, supply businesses and just about any other sector you can think of, so start your search from there.
Finding the right loan can be daunting, but following these steps will ensure you enter the market knowledgeable and prepared, so that the chances of getting the wrong loan are greatly reduced.
