Cash flow is the main reason why 82% of businesses close. It’s hard to manage cash flow. As we saw during the pandemic, many businesses didn’t have enough cash flow to survive a few weeks.
Loans for businesses can help businesses face cash flow challenges or get the capital they need to grow.
The main problem is learning how to pick business loan lenders. Look online, and you’ll see hundreds of business loan lender options.
How do you know which ones are viable? How do you know you’ll get approved? Read this guide to choosing lenders for small business loans.
1. Purpose and Amount of the Loan
What are you getting the business loan for? There are specific loans for different industries and purposes.
There are loans for businesses that apply to the agricultural industry, such as livestock and feedlot loans. Learn more about these types of loans.
Check your budget and determine how much you need. If it’s for a project, add on several percentage points for contingencies.
You also want to check your credit score. Lenders look at your personal credit score.
This will play a factor in the type of lender you choose. Banks only approve 14% of loans. Nontraditional lenders approve about 25% of their loans.
If you have a low personal credit score, clean it up and look at nontraditional business loan lender options.
2. Get Referrals From Your Network
The first place to look for business lenders is through your personal network. Ask people who you know and trust to recommend a few names.
Start with a list of names and look them up online. Make sure they’re licensed and accredited to distribute business loans.
3. Products and Rates
Check the types of products they offer. Some lender loan options only offer a few basic options. Others have a full suite of business loans.
The most important thing is they have a loan product that fits the purpose of the loan.
Contact a few lenders and get prequalified for a loan. This is a way to get a general idea of what you qualify for without damaging your credit score.
There’s more to comparing lenders than comparing loan costs and rates. Look at the loan terms and conditions.
Find out if there are prepayment penalties and what the terms and conditions are. There may be some fine print in the terms and conditions that aren’t favorable to you.
4. Streamlined Application Process
Applying for business loans is a long and frustrating process. Lenders want to see business plans, financial documents, tax returns, and a host of other papers.
They want to make sure you can pay back the loan.
How to Pick Business Loan Lenders
If you need capital for your business, there’s no shortage of loan lender options. Before you pick business loan lenders, make sure you know the purpose of the loan and how much you need.
Compare rates, loan terms, and the process for applying for business loans. You’ll save yourself a lot of headaches down the road.
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