8 Key Questions To ask When Applying For A Business Loan
Whether you need to hire additional employees or purchase new equipment, growing your business requires capital.
Most small business owners need a loan at some point. As your business grows, your need for financing does not decrease.
Whether you need to hire additional employees, introduce a new product or service, expand your facilities, or purchase new equipment, growing your business requires capital.
What are some questions to ask yourself before applying for a business loan?
Before you start filling out business loan applications there are a few things to consider ask yourself these 8 key questions:
1) How much is my business worth today?
Lenders want to know if your business is worth enough to cover the loan. You need to have a sustainable business model that lasts at least as long as the term of the loan you are seeking.
See also : 3 Powerful Questions To Ask Yourself Before Applying For A Loan
2) How much do I really need?
Make sure you know exactly how much money you need for what you’re planning.
The best way to do this is to create a monthly cash flow projection. Lenders want to see that you have thought it through.
3) What is the money for specifically?
Lenders want to see a detailed plan of the money. If you plan to buy new equipment, you need to show price quotes and demonstrate why you need the equipment and how it will benefit your business growth.
4) Will the money help my business grow?
If you’re trying to borrow money to cover payroll or other day-to-day expenses, then your business isn’t going to make it past a few months. By not using the money to generate more income, you are only delaying the inevitable.
You need to find ways to increase revenue and decrease costs so your business can survive.
5) How urgent is my need?
Whenever possible, it is better to anticipate future needs than to try to find money under pressure.
It’s much easier to get approved for a loan when your business is doing well than when your business is already struggling, so plan ahead.
6) How are my personal finances?
Until your business grows beyond a “small business” (more than $5 million in revenue per year), lenders are going to rely heavily on your personal financial situation and credit score to determine the creditworthiness of your business.
Therefore, make sure that these are in good condition before applying for a loan.
7) Are you likely to qualify for a loan?
Applying for a loan and being turned down will hurt your credit score. It’s a good idea to contact lenders and ask about their specific requirements, such as credit score and cash flow, before you apply.
8) How strong is my management team?
Companies seeking funding to grow need to demonstrate the ability to effectively manage growth.
If your current team isn’t up to the task, consider adding a new employee to help take your business to the next level.
Grow your business
Before you apply for a growth loan, you should make sure you’ve thoroughly determined your need, reviewed your current situation, and considered all of your options.
If you can show that the money will be used to increase income, then you are well on your way to qualifying for a small business loan.
Ready to apply for a loan to grow your business? Make sure you’re properly prepared with this helpful Small Business Loan Checklist in the form of questions to yourself before applying for a business loan.