Finding small business loan is easier now than ever, here we will take you on a journey on how to find small business loan without struggle.
Do you need financing for your small business? Even as a startup or growing business, there are options available to help you access the money you need.
Before you can access financing, it’s important to build up your business credit, create positive financial habits, find the loan options that are most relevant to your business and gather the essential documents required by your financial institution of choice.
This process can look slightly different for each business, depending on your company’s history and the amount of money you require. But these basic concepts are almost always true.
What do you need a small business loan for?
The first step of any business loan search is to determine what you need the financing for.
From bank loans, to inventory financing, to MCAs… There are a lot of different types of small business loans on the market. Each loan out there serves a different set of business goals.
Need working capital to finance regular business expenses? A traditional business line of credit could be a good option. Need to finance past due invoices? Invoice financing is the perfect loan for your business.
Some common business financing needs are:
- To start your business
- Quickly take advantage of a new business opportunity
- Expand your business
- Keep a cushion on your cash flow
- Manage your daily expenses
- Finance some equipment or inventory purchases
- Purchase commercial real estate
- And more
Pinpoint why you need the capital, and filter your search for the best small business loans to fit that goal.
What type of business loan could be best for you?
A business owner’s access to small business loans has changed a lot in the last 10 years. Traditional banks and credit unions aren’t the only lenders in the small business lending industry anymore, and loan types have diversified beyond just term loans and lines of credit. From 2015 to 2017, online lenders funded nearly $10 billion in small business loans, and show no signs of slowing down.
These days, these online lenders offer are many different types of business financing methods. Here are some of the most common you’ll find:
Some common business financing needs are:
- Business term loans
- Business lines of credit
- Short-term loans
- SBA loans
- Invoice financing and factoring
- Equipment financing
- Merchant cash advances
- Purchase order financing
- Inventory financing
- Commercial real estate loans
- Personal loans for business
- Business credit cards
It’s important to note that one loan type could better fit your business financing needs than another could. For instance, if you invoice your customers and find yourself frequently running into cash flow issues, bridging the gap between when you provide your services and when you get paid with invoice financing or factoring could be the perfect small business loan option for you.
On the other hand, if you’re making a fixed investment that you know will pay off for your business, a lump sum loan (like a business term loan or short-term loan) could be the best type of business
In the end, it comes down to knowing what options are available. Bank loans often offer the most competitive business loan interest rates, but a different loans product from online lenders could be more conducive to your needs.
What can you actually afford?
Once you’ve determined why you need the small business loan and what types are available, the next step is to think through how much financing you need—and most importantly, how much small business loan you can realistically afford.
One of the first questions online lenders will ask you when you start your search for small business loans is “How much are you looking for?”
Yes, every business owner would love a cool $5 million. But instead of thinking of this question as how much you want or need, think along the lines of what you can actually afford. You don’t want to take on more debt than your business can handle. If you don’t know the answer to that question, follow these steps.
Gather Essential Documents
In order to qualify for small business loans, you need to gather documents that prove your credit worthiness. The exact documents you need depend on what type of loan you choose to apply for, but you are likely to at least need basic financial statements, expense reports and loan applications.
Once you find a lender that suits your needs, work with them to determine the exact documentation that is required to obtain financing. There may be some items that are required and others that are just recommended. As a small business, it’s always a good idea to provide as much information as possible that proves your ability to repay a loan. So plan on working hard to gather all relevant financial documentation throughout the process.
It is possible to manage the cash flow, upgrade business equipment and grow the business by the option of business loans. Each bank has specific requirements, criteria and eligibility factors. Here is the list of few banks document requirements and other details mentioned.
Checklist of Documents Required for Business Loans
To avail a business loan, an applicant needs to provide the following documents as per the lender’s requirements.
- Identity Proof: Driving License / PAN Card / Passport / Voters ID Card / Aadhaar Card.
- Address Proof: Ration Card /Telephone Bill / Electricity Bill / Passport / Trade license / Lease agreement / Sales Tax certificate.
- Income Proof: Bank Statement of Last 2 Years.
- Financial Documents: Last 2 Years ITR along with computation of Balance Sheet, income & Profit & Loss a/c for the last 2 yrs.
- Proof of Business Continuation
- Business Ownership[ Proof: Other Mandatory Documents such as Sole Proprietorship Declaration, Certified true copy of Memorandum & Articles of Association
- Last 3 years audited financials