Small Business Loans
So if you have a small business or are thinking of starting one, you know that funding is going to be the one thing that dictates your actions, your marketing plan, and ultimately, how fast and how large you grow your business. That said, while many small business owners would prefer to fund as much as possible out of their own savings or pocket, there will be times when you need to look for small business loans to help with a particularly tricky business situation, your expansion or purchasing new equipment that you need in order to serve more customers. It is at this point that many business owners make their first forays into the wonderful world of loans, credit lines, and lenders. And, too often, it is here that they get confused and ultimately pick the wrong type of loan for their particular business. While we hope to help you make the right choice, also consider that you may not need any type of small business loan or business credit line at all.
Of course, this is the first and most important key to the whole process: need to figure out whether or not you actually need that shiny new computer, that new piece of software, or the extra capital to work with. In short, you need to have a plan for expansion and you can’t just go and apply for loans without thinking about not only how they will be best used for your business but also how you’re going to pay them back; this is particularly true if they are fairly large amounts or if you have to deal with high interest rates. One piece of advice to remember is that you really should work with what you have before you consider going into debt. Often times, you can run your business quite effectively using the tools and knowledge that you already possess. True, it may not be the latest thing or the fastest computer, but if you exercise some discipline – especially in the beginning stages of your business – you’ll find you’re able to eventually get the things that you need to become more efficient, without having to worry about where things like rent or food are going to come from.
This is something that many small-business owners, in the rush to get a business up and running, seem to forget. In fact, it is something that lenders of small business loans sometimes count on. Consider for a moment that while the economy is getting better, it is still very rough in many places. This holds true for lenders as well. After all, if you have no one to lend to, you have no way of increasing your income. That said, as a business owner, you first need to make sure that you practice the self-discipline to know when you should get a small business loan and when you should abstain. This can be a difficult task: as small business owners, as entrepreneurs, as people who want to boldly chart our own path in life, we sometimes forget that we don’t necessarily need the top-of-the-line software, computer, or what-have-you in order to make our business a success. While it is very true that many of these tools can aid in getting more clients more quickly and getting work done more efficiently, the key is to have a daily plan of action and a mastery of your processes. Without those in place, any new equipment will only be a detriment to your business.
One other thing to consider is that you really need to shop around when you’re looking for business lines of credit, business loans, or small business loans as well. This is something that many of us seem to forget in the rush to get more things done and squeeze more into the 24 hours that we all have. The first place you want to start when you’re researching business loans is in your own local neighborhood. These are the same people that you will most likely be serving as a small business owner and therefore, it makes sense to start your research here. Naturally, you can use the Yellow Pages. However, a better idea might be just to ask friends and family about their various experiences and preferences. Take the time to go meet face-to-face with each of the lenders in your area. This not only allows you to see what is being offered, but also allows you to play them against one another and get the best rates and terms for your business.
Once you’ve done this, you may also want to search online. One thing you must be prepared for is the fact that you will find many different results, and not all of them good. You need to be ready to do a little bit of deeper research to make sure that you do not get swindled – and of course to make sure that you get the right offer for your business. With the number of options online, this might well seem like an impossible task. That’s why it is crucial to have a plan first. If you know exactly what you need, and what you’re willing to take on in terms of both payments and interest, this will allow you to very quickly whittle down your choices so that you can make an informed decision faster. Additionally, when it comes to online small business loans is that often times the application process, although almost the same as the physical process, is much quicker.
While many small business owners will look to banks for small business loans, there is something to be said for smaller credit unions and nontraditional lenders as well. Often times, what you’ll find there is a smaller firm that is more open to what you might need and, in fact, maybe more flexible with respect to things like payment terms and schedules; overall you may find that a better fit for your business. Although there is a certain amount of prestige that comes from getting a business loan from one of the big banks, there’s also a lot more bureaucracy and red tape to deal with. And with the current state of the economy, big banks are less likely to look at a small business that is just starting out or has shaky credit, no matter what the reason. With nontraditional lender, although you still have to watch your credit rating, you may find it easier to work out a mutually agreeable loan where you get the money that your business needs and they are happy with the terms of repayment.
One final thing to consider when it looks like you need to get some form of small business loans is that you need to have the ability to use the loan for what it was intended: your business. Far too many times, especially if you are the sole proprietor in your business, the temptation is to use the money for other things such as paying off personal debts, going out on the town, or even that new TV you’ve had your eye. You need to make a choice as to whether or not you want to go for the short-term, instant gratification of a shiny new toy or the longer-term gratification of a successful and growing business. While you can (and should, when you’re just starting out) use what you have at your disposal, you will eventually have to upgrade your equipment as well as your knowledge to ensure that you keep pace with the advancement happening in your industry. You need to stay on top of the techniques and information as they become available, and sometimes that entails going to a specific course or seminar. But if you’ve used your loan money for something frivolous, you obviously will not be able to do that without incurring even more debt.
So, then, the correct choice is delayed gratification, allowing you to reach your business and personal goals. You also need to weigh the long-term ramifications of the loan that you are thinking of getting. You want to make sure that you get only what you can afford and no more, even if it is offered to you. In doing so, you’ll not only stay on budget, but you’ll be able to pay your small business loan off regularly and on time, thereby improving your relationship with your lender and raising your credit score.