Growing your small business without the necessary financing is impossible. A merchant loan is something that can help you get from A to B, providing vitally important capital to jumpstart your business expansion. Read below to know the ins and outs of small business loans before applying.
Know Merchant Loan Specifics When Applying
When seeking financing for your small business, you should be well prepared both mentally and practically. Read the below info concerning the process so to make it painless.
- Have a clear image of what you need the loan for. Do some research to see what types of loans are available in the field.
- Make sure you gain a good understanding of all your options. Take into account both the pros and cons of each option so to know what to expect.
- Even if you’ve got separate financial accounts for your business, lenders will still take into consideration your personal credit score.
- If you’re considering secured lending, you’ll be offered better interest rates since the lender takes on less risk. However, the process will last a bit longer.
- As for unsecured lending, it’s based on other factors, such as how strong your business is in terms of cash flow.
- If you’re considering bank loans, you’ll need to show your business has been operating for at least 1-2 years and meet annual revenue requirements.
- If you lack collateral, have a new business, or need quick access to working capital, alternative online lenders are the best option to go for. Alternative lenders may charge you higher rates, but you’ll enjoy more relaxed standards. Application is quick, simple and hassle free. So, a merchant loan from a reputable business funding provider that can guarantee the lowest possible rates will help you avoid headaches.
- As one of the professionals in the field notes, it’s important to find a loan with the lowest APR, as long as you can handle the payments. He further advises merchants to do some “serious soul-searching” before starting the loan-application process.
- With SBA-backed bank loans, you’ll be required to show excellent business and personal credit. The SBA offers general small business loans through banks with its loan program.
- With microlenders, you’ll need to provide a detailed business plan and financial statements. Also, you’ll need to be prepared for some serious paperwork.
- Know what annual percentage rate (APR) the loan charges. Besides, know what fees you’ll be paying. Don’t forget about prepayment penalties.
- Small banks are likely to show greater willingness to help you with your loan, which can’t be said about major banks. The reason is that the latter banks prefer working with bigger businesses.
- Make sure to prepare a request that’s as specific as possible. It’ll help lenders assess your small business loan application correctly.
Before applying for this or that type of business funding, you should, first of all, be prepared for that specific loan. So, know all the basic ins and outs associated with the available options so to make the right choice for your business.
Author Bio: As the FAM account executive, Michael Hollis has funded millions by using business funding (merchant loan) solutions. His experience and extensive knowledge of the industry has made him a finance expert at First American Merchant.