Understanding Small Business Financial Assistance

If you want to start a small business, you need to be aware of all obstacles facing this challenge. One of the biggest problems you will face is getting a small business loan. The reason that these are difficult to obtain is because banks have high lending standards when it comes to this type of lending.

Understand Why You Need This Loan

Many small businesses that are looking to startup just want to get a loan without understanding why they are trying to get one. The reason you would need a small business loan is so that you can start your business, grow your business, manage day-to-day expenses, and/or have a safety cushion in case anything happens.

What Type of Loan Should You Get?

The type of loan you should look to get is determined by why you want the loan in the first place. It is important to remember that a majority of banks will disqualify you almost immediately if there is not data showing cash flow that supports the repayment of the loan. If you have already “started up” your company and now just need to better manage and grow your business you can look into financial options like term loans, SBA loans, invoice factoring, and business lines of credit.

Where Should You Borrow From?

There are numerous lenders out there, so which one should you go to? The types you will primarily encounter are traditional banks, online lenders, and nonprofit microlenders. Each of these lending options have different aspects that you need to be aware of when you decide. Once know the type of assistance you need, you can go through lending options and compare which would be best for your situation. You will want to go with a traditional bank if you have good credit, can provide collateral, and don’t need cash as soon as possible. You will want to go to a microlender if you are ineligible for a traditional loan because the size of your company is too small. You will want to use online lenders if you don’t mind telecommunicating, you don’t have collateral, and you need cash fast.

Will You Qualify for Assistance?

This is different depending on the lender but it is good to know your credit score, and your business history like how long have you been operating, do you have enough income, and can you repay the loan based on cash flow.

Come Prepared

Regardless of the lender you choose, you will want to make sure you have all the proper documentation for applying. A good list of documents will include your business and personal bank statements of the last 6 to 12 months, business and personal tax returns, and business legal documents like licensing and registration.

Overall

The process of finding financial assistance whether it be a loan, or any other form of help can be difficult for small businesses. You can see what your options are per lender and even speak to your local bank to go over what options are available for your situation. Take your time and you will be able to figure it out!