You are bound to see unexpected expenses while running a business. If you don’t have enough savings, little things could turn out to be big hurdles. You may need to replace equipment or have to pay your employees because your clients haven’t paid you yet. There could be any number of reasons for taking a loan, but how to determine which loan is best for your business? Here are some tips to help you decide which one is right!
Why do I need the money?
If you need money because your business isn’t making enough then a loan may not be a good option. A loan can’t save your business or help you make money. But if you need money to cover temporary expenses then go for it. Here are few situations where a loan is suitable:
- Paying employees until you are paid by your clients
- Buying equipment for upcoming projects
- Taking care of sudden expenses
- Expanding space or moving to new office
- Upgrading some of the equipment
Analyze the situation
One way to narrow down your loan options is by analyzing your credit score. It may surprise you that many lenders look into your credit before handing you the cash. They want to make sure that you are capable of repaying the money. By analyzing your credit score, you can sort out your options based on your current credit score.
If your credit score is low then you can take steps to improve it before applying for a loan. If there is a small business loan with low interest rate then it is better to wait and apply when your credit score is fixed.
Keep in consideration that not all lenders will look into your credit score to determine your eligibility, and they may have minimum credit requirements.
Which loan is best for my business?
It’s time to decide which loan is best for the business. Your reason for loan will dictate the type of loan you can get. If you are starting a new business, it is impossible to get a loan in first year. You may have to rely on business credit cards, crowdfunding, borrowing from friends, microloan from a lender, or personal loans. To manage and cover monthly bills, payroll, rent, or inventory you want:
- A short term loan: A quick solution that can be repaid in a short period of time
- A line of credit: It allow you to borrow and repay money you need – Same as credit card
- Invoicing factoring: It allow you to cash un-paid invoices and repay when your customers pay you
If you want to expand the space, shift to another location, buying a new equipment, or adding a new product – you’ll need:
- A lump sum: A long term loan that has fixed payments. Your loan shouldn’t be more than the equipment you are buying. For example: if you are buying a washing machine for five years then your loan should be for five years.
Narrow down options and compare
Not every loan is right for your business. You should compare your options and match business needs with a loan. What you qualify for? How you intend to use the money? And how much you can repay? These are some of the questions you should focus on.
Compare your final options to find how much the loan will cost. Calculate annual percentage rate, it will include interest rate and other fees attached with a loan. You will know how much it will cost you in one year. Do research and don’t settle for snazzy offers – Make wisest and most affordable investment.
Where do i apply?
You can apply with your bank or use on of these private lenders below:
KABBAGE.COM – #1 Online provider of small business loans. Kabbage puts the power of business growth back in your hands by giving you convenient access to working capital.
Enjoy ongoing access to your line, and take the funds you need day or night. Pay only for what you take and draw against your line as often as once a day.
Select the amount you need and they’ll deposit working capital directly into your bank or PayPal account. No waiting in line.
Requirements: 1+ year in business & $50K annual revenue.
Lines of credit from $2,000 to $100,000.
A+ Rating with the Better Business Bureau