If you’ve ever try to get funding for your business then you know it can be a difficult task. Getting money from the bank for a business is next to impossible. Unless you have perfect credit, been in business for many years, and have more cash flow than you need, then you can get approved with a bank. The saying goes that most businesses qualified for funding with the bank are those which do not need the funds. There is no risk involved because the business doesn’t even need the money. So if that doesn’t sound like your business, which it won’t foremost, then you’ll likely need to look elsewhere.
What do you need the funds for?
Right off the bat, most lenders will want to know exactly what you need the funds for. This will determine which lending program is right for you and if you will qualify. The first step in the process will be for you to decide exactly how the money will be spent. Then you will need to calculate the return on investment if there is one. If you are not considering how this money will be used to increase your business then you should probably just stop here. This lending type is not for businesses looking to just stay afloat. You want me to be aggressive.
A lot of times businesses need money early on, but this can be tricky. If you don’t have the time in business and a record of success then it is less likely you will be approved. However, the intent is to take on new projects, hire more staff, purchase more inventory, or anything else for the business to grow then there’s probably a program fit for your business.
It is imperative that a business owner be living and dying the numbers. Live in the numbers. Once you have analyzed your business opportunities, then it will become crystal clear how to utilize the funds effectively. No lender wants to put a business in a situation where can I pay back the loan. That is not the intent. The responsibility is on the business owner to use the funds in a way that is positive. Only you have that knowledge. Only you can decide what is best for your business. We recommend putting together a detailed plan and schedule with revenue projections based on specific funding amounts and terms. Once you have these projections, negotiating a loan and understanding what your business needs are will put you at an extreme advantage.
What loan type do you need?
Once you have fully analyzed your business opportunities and put your plan in place, the next step will be to determine the best lending option for you. The funding amount and loan program you choose will have a profound impact on the future of your business. Do not take this lightly. There are a number of programs and more lenders than you can count, so this task will not be simple and should not be done quickly. It is recommended but even once you have chosen the loan type you need it is in your interest to get quotes from a number of direct lenders. This will allow you to make the best decision and use other offers as leverage in negotiation. Remember, it is possible to negotiate the terms of your loan. Typically, brokers have a range of points they can apply to a loan.
If you are looking for equipment, then the best loan type will be equipment financing. You could consider doing a leasing option, which would provide a much lower monthly payment. These lines are much easier to get because they are secured by the equipment itself. If this is the case, then working with the bank may still be an option. It is possible that you could get better rates and terms with the bank for equipment financing. That is, if you have good credit, both personal and business.
Another funding option for businesses is commercial real estate. Businesses looking to you purchase property are capable of securing a commercial mortgage with very low interest rates. This is another loan type that is secured, making the loan a lot less risky for banks and lenders. If the borrower fails to make payments the bank can recover the property and put it on the market for sale. They are then able to recover money owed.
Aside from equipment financing and commercial real estate, all other business funding needs will fall into the category of working capital. That doesn’t mean you’ve narrowed down your options. Ana direct lending world, working capital Loans come in all shapes and sizes. You can save yourself a lot of money by choosing the shortest term loan you can possibly live with. The shorter the loan term, the less interest you’ll have to pay. Obviously this should sound like common sense for most.
Research the best lenders
Once you’ve nailed down what you need the funds for and which loan type makes the most sense, you’ll want to do plenty of research on lenders. One place to start is looking at their reviews on social media. If a lender is taking advantage of businesses it will become apparent very quickly. Business owners will speak out against lenders utilizing deceptive tactics. However, the responsibility of the loan ultimately lies with the borrower. Unless there is fraud in the agreement, the borrower must agree to the terms. Therefore, it is sometimes difficult to feel sorry for businesses who find themselves in difficult situations do to you poor lending practices. That’s not to say these lenders should not be exposed and held accountable.
If you are pressed for time and cannot devote the necessary resources to examine which lenders offer the best programs, it may be in your interest to work with a trusted broker. A broker can get you a number of options with multiple lenders with one application. Then you’ll get the full scope of what your options are. We do not recommend only getting one quote though. Make sure to do at least some due diligence when considering taking out a loan. If there are multiple managing partners in your business then we recommend everyone involved review all agreements before signing. Even if you have a friend or colleague I will review this loan for you we recommend that you do so.
What business loans do you qualify for?
Lenders will look at your company’s time in business, gross revenue, average balance, number of deposits and credit. So determining which loans your business qualifies for will depend on these factors. The longer you’ve been in business the more options will be available. Additionally, companies with revenue in the seven figures will have much more opportunities to choose from. We recommend applying with multiple lenders and then choosing the best option. Nobody can tell you what you qualify for without an application. Lenders understand that you do not want to harm your credit by having a bunch of inquiries. Therefore, many will use a soft pull for their pre-approval. Once you have decided to accept the loan the lender will then do what is called a hard pull.
You are looking to purchase a home, in the process, that would probably be the only reason not to apply. Even lenders who utilize a hard pull in the application process, it will still only affect your credit minimally. This should not be a barrier to getting more information and trying every possible avenue for funding. It will only put you at an advantage to see all of your options and make the best decision for you.
Whatever you do do not go with the first option you are presented with. Only out of desperation does this seem like a good idea. However, more time and information will always lead to a better decision.
What documents do you need to apply?
Most lenders and banks want to see the same things. Therefore, since to put your documents together, so that you are ready to apply at any time. Typically, you will want to provide 3 to 6 months bank statements, most recent tax return and a one-page application. Do you want me to personally guarantee the loan, and must have majority ownership or all owners will need to sign. Personal credit is not the deciding factor, however, it will be look at. There are minimum requirements for every program in regards to credit. Bad credit options do exist but usually you will need at least 500 credit score minimum. Otherwise it will be next to impossible to get the funds you need.
If you are looking to do a merchant cash advance you will need to provide credit card statements for the past few months, typically 3. This type of lawn has become less common but it’s less risky. If you have high credit card transaction volume it will likely help your file i’m pretty a larger funding approval. Additionally, any accounts receivable or invoices can help your file but ultimately lenders will be looking at how much revenue your business produces.
What is the application process?
Once you have your documents ready to submit, most lenders will provide an approval within 24 to 48 hours. After this time you’ll find out the funding amount and the terms of your loan. If you are working with a broker they will likely offer multiple options to choose from. Once you have selected the terms and program that works for your needs, your file will be submitted to underwriting for final processing. Typically there will be a quick interview with underwriting to make sure you understand the terms of the loan. If you are renting and the funding amount is more than 75,000 a lender may also require an inspection of your office. Once the inspection is complete the wire will go out that day. Going on your bank and the time the wire goes out you’ll receive the funds within two days.
The entire application process from beginning to end can be completed within 2 days if everything goes right. Most of the time loans are funded within 5 business days. If you are not ready to take the funds they will be available for 30 days. After that time your file will need to be re-evaluated and updated with most recent bank statements. If you do not need the funds right away it’s probably best to wait to apply until you do.
You need an active US business bank account to be approved for a working capital loan. Submit your information and one of our account executives will respond within 15-30 minutes from the time of the request during business hours. Once the loan is approved & accepted, funds will be wired directly into your business bank account and they're typically available within 24 hours.