Growing your small scale business on your own can be daunting and frustrating and sometimes, it may look like its not working.
To take the load off you alone running the business, you need to acquire new equipments, hire new employees and so on to eventually increase profit
Given the fact that you need to acquire equipments and hire workers among other things, you also need enough capital to purchase it but not having the capital is as good as not getting any equipment or employee which will keep resulting to frustration at workamong other things.
Hey everyone my name is Timileyin and in this post i will be showing you what it takes to start a business loan.
Small business loans can take your business from a level to another level, it could be positive or negative depending on how well you utilize the loan , although it can be very difficult to obtain one and in the event of you not being able to meet up for the payment of that loan received, you will lose your collateral to the lender.
Considering the fact that your business is small scale and in the event of it losing some or all of it’s properties as collateral, it most often than not will lead to the business going bankrupt.
What i mentioned above are just the downside of loans, that doesn’t mean that businesses and even big companies and organisations do not make use of it, they actually do make use of it so do not get all discouraged.
One of the basic and major things banks look out for when giving out loans is the period of time that business has been in existence, in most cases they tend to render their services to businesses that are about one to two years old and tthose that also meet their other requirements.
Some of the criteria for small business loans are as follows
While trying to understand the criteria for small business loans, you need to understand that the requirement(s) is/are dependent on the type of business loan you are receiving.
1. BANK LOAN
Since bank loans are backed up by SBA ( Small business administration ), you will need to possess excellent business and personal credit.
The SBA in the US makes it possible for small business loans to be made available through 7 (a) loan program. According to an online resource NerdWallet, the average SBA loan size is $371000 but it is said that amounts can vary between $5000 and $5 million.
To qualify for this loan, the following has to be met
- CREDIT SCORES
To be eligible for a bank loan, one of the intricate requirements is that you should have a credit score of about 680 at least.
As previously stated, most businesses with at least one year duration are eligible for loans but most banks prefer businesses with at least two years duration.
- MINIMUM ANNUAL REVENUE
Most banks have their minimum annual revenue but most ranges between $50000 to $150000. Try and know what your bank’s value is.
- EVIDENCE OF THE ABILITY TO PAY BACK.
Banks want to be certain about their money being paid back and to that effect, they usually demand for the business financial statements to actually determine if they can grant that business the loan it demands.
As a small business set up, if you need to loan money, moneylenders are your best bet. They are non-profit that lend for short term with about $35000 or less. The also have a higher annual percentage rate (APR) than bank loans which is a green check when building a temporary cash-flow gap.
3. ONLINE LENDERS
When you do not have collateral to request for a bank loan but you can run some few businesses online, online lenders are your best bet but they should also be your last resort. They should be your last resort because they make it difficult for businesses to pay back due to their high APR of about 108 percent.
When you apply to an online lender, the chances of getting the loan are high and within 24 hours you can get your money . To help yourself, stick to a strict payment plan so you do not find your business under the bus i.e ( to avoid your business to be in debt ).
When aiming at taking your business on a large scale, taking small business loans can be what your business needs to make that possible but if things go hay-wire, it can cost you a lot more than what you think so be double sure you want to venture into this. My advice for you is that before sticking your head into this, try other sources of money generation, it could be angel investing, venture capitalism and the likes.
Be also certain that you are expanding your business for the right reason, if the need is not there, there is no point trying to risk your business through this process.
I’m sure you have learnt a few or two about what you need to do to be eligible for receiving business loans for lenders.
Read, practice and share.