Whether you’re aiming to grow your business or keep it from going under, taking out a business loan may be one of the options you’re considering. When there is so much at stake, there are critical factors to consider before applying for a loan.
Our team at Saddock Advisory understand the potential and the risks associated with applying for a business loan. We are confident that we can help you decide if this is the best plan for your business right now. Our team of experts can guide you through every step of this process.
You might find yourself at a loss for how to begin navigating the entire loan financing process. You might be asking a simple question, “How do I get a small business loan?” Unfortunately, the answer is not as simple. These are just a few factors to think about when applying for a business loan.
Who Can Get a Business Loan?
Your first step is to ensure that you’re eligible to apply for a business loan. Forbes Advisor provides the following list of those who can apply for financing.
- Self-employed individuals
- Proprietors
- Partnership firms
- Private limited companies involved in the business of manufacturing
- Traders
- People dealing in services
General Loan Eligibility Criteria
You’ll want to ensure that you meet the following criteria before proceeding with the loan process. Forbes Advisor lists these minimum requirements.
The applicant:
- should be 21 years of age or older. Although, some organizations have a minimum age requirement of 18-25 years old.
- should not be more than 65 years of age at the time of the loan’s maturity.
- should be able to prove that their business has been profitable for at least two years.
- must have been in existence for at least two years. Also, they must have at least five years of experience running a business.
Essential Factors to Consider Before Taking out a Business Loan
1. Create a Business Plan
Although not all lenders require it, having a formal business plan laid out will serve two purposes. It will help your possible lender understand your knowledge of the industry and enthusiasm for future opportunities in the market. Be prepared to prove why you are worthy of a business loan, including how the financing will increase your business’ bottom line. Make a list of your business goals and the strategies you will use to be successful. This way a lender is able to see your determination.
2. Decide How Much and When to Borrow
It is best to take your time deciding how much you will request to borrow. The less urgent your need is, the better your options will be. Before seeking a business loan, consider the following two important factors. Improve your credit score and save money, so you don’t have to borrow as much, which will save you money in the long run.
3. Check Credit Score & Prepare Necessary Documents
- Your credit score will be the most significant determining factor in getting your loan approved. Request a copy of your score before applying to ensure its accuracy. A high score will help secure a low-interest rate. Anything below a score of 700 will come with a higher interest rate if the loan is approved.
- Start collecting your paperwork early! That includes financial projections, tax returns, proof of asset ownership, and current bank statements.
4. Research Lenders & Compare Rates
- Different lenders come with distinct advantages and disadvantages. Some may offer more competitive interest rates, but the process can often take months. Some offer fast financing to borrowers with lower credit scores, but the loan conditions can be sketchy and expensive lending terms. Make sure you review all fine print regarding fees and terms of the loan, which are not always defined clearly.
Trust the Loan Advice of Saddock Advisory
Remember that just because you’ve applied, you don’t have to accept a business loan offer immediately. It’s essential to take your time, reevaluate your needs, review your options, and consider the factors associated with each.
Saddock Advisory is here to walk you through the process, offering our professional and exceptional expertise for your financial planning needs. We are confident that we can provide you with the best information so that you can make the right decisions for your business. Contact us today.
