If you need a loan to help your small business get by in tough times or expand because you are starting to do well, it is important that you know how to properly go about getting the loan you need. Each year thousands of businesses in the UK apply for loans, but not all of them get approved. The more information you get on these loans, the more likely you will be to acquire the funds necessary to help your business thrive. There are a lot of things that don’t occur to most businesses, but they are crucial to keep in mind nonetheless.
Common Reasons for Getting a Small Business Loan
There are lots of different reasons that small businesses apply for loans, including:
- Expansion: Many businesses need a loan to open a new location or expand in some way. If you are doing well and think it’s time to start expanding but don’t have quite enough cash, getting a loan is a good option to consider. One of these loans will provide you with the revenue necessary to grow your business by leaps and bounds.
- Building Credit: Another good reason for a business to apply for a loan is to build up credit for later on. The better your business’s credit, the easier it will be to get bigger loans in the future. If you manage to pay off your first small loan on time, it will definitely work in favour of your credit. This is something that lenders will be sure to take notice of down the road when you apply for other loans.
- New Equipment: If you require new equipment for your business, it might be necessary to get a loan from the bank. Whether it is new computers or something else entirely, this loan could go a long way towards getting your business what it needs to function efficiently.
- More Inventory: Businesses that want to purchase new inventory should think about getting a loan. Seasonal businesses often get loans for this reason, and they can be incredibly helpful.
Look at Your Cash Flow
The only way that you will be able to get a loan is if your business has adequate cash flow. When you are applying for the loan, the lender will take a close look at the current profitability of your business. You will want to make a point of running the numbers to determine whether or not you will be able to pay back the loan on time. By doing this you can save yourself a lot of time and effort as well as disappointment. The amount of cash flow you’ll need to have will depend on the size of the loan you apply for.
One of the more common reasons that businesses get turned down for loans is because they were so disorganized when applying. Make sure that you have all of the necessary paperwork already together before you sit down to fill out the loan application. This will go a long way towards helping you to get approved. The lender will need quite a few different documents from you, including proof of cash flow for at least the past year. When you know which documents you will need to have in advance, you will be able to adequately prepare yourself.
Be Honest on the Application
Although you might be tempted to fudge certain things on your loan application, it is imperative that you are completely honest. Any inaccurate information on your application, even if it is an honest mistake, can mean being rejected. Double and triple check your loan application for errors before you submit it. This will boost your chances of getting the money you need for your business. Any lender will be very hesitant to give a loan to a business that doesn’t submit completely accurate information in their initial application.
Get Expert Advice
It’s always a good idea to talk with an accountant before getting a loan for your business just so you can make sure that everything goes as smoothly as possible. A financial expert of some kind can provide you with the information necessary to make the right decision. The last thing you want to do is get a loan without consulting with someone who deals with finances professionally, because you could end up making a horrible mistake.
Research Your Lender Options
You should set aside a decent chunk of time to research the various lender options you have so that you can select one that is trustworthy and fair. If you want to get a great deal on a small business loan with reasonable terms, you don’t want to choose the first lender you come across. This research will be hugely beneficial to you and your business, so make sure that you take enough time to do it. There are tons of lenders that give out loans to small businesses in need, but they aren’t all one hundred percent reputable. One of the most effective ways to select the right lender is to look up reviews for some of them online.
Getting a Loan with Bad Credit
If you have bad credit but still need to get a loan for your business, it is even more important that you weigh your options before rushing into anything. There are plenty of lenders out there that can give you a loan even with bad credit. While you might end up paying a higher interest rate, you will still be able to get the funds you need.
Make sure that you know what your credit is already like before you apply for a loan so that you know what to expect. Everyone should take a close look at their credit report every once in a while just to check for errors if nothing else. If you find any items on your report that shouldn’t be there, you could end up giving your score a much-needed boost.