Business loans can be lifelines for businesses of all sizes, assisting them cope with seasonal fluctuations in sales or unexpected expenses. They can also be used to finance new equipment, inventory or a new location. The key is to make use of the money wisely so you can expand your business view and not rely on financing through debt in the future.
Before you submit your application, you must determine how much capital your business requires and which loan is best suited to meet those requirements. You will also need to be aware of the time you want to repay the loan, since this can affect your interest rates and fees. Many lenders provide one-time funding or a line of credit with terms for repayment ranging from some weeks to years.
You’ll need to provide several documents, such as your business plan, financial statement and credit history. They may also ask for collateral, such as equipment, real estate or money owed by your company (accounts receivable). Some lenders will waive these requirements for existing borrowers, those with stellar credit and those seeking large amounts of capital.
They will also determine if your company has the capacity to repay the loan using indicators such as its fixed-charge coverage ratio, as well as the amount of cash it will generate every month. They will also verify whether there are any outstanding loans and determine whether or if it is in compliance with all legal requirements. They will also examine the field you are employed in to determine if it’s volatile or stable.