A business owner who is running a small business may require funding at some point of time. Funding may be needed for a number of reasons. If you have ventured out to start a new business, you may require startup funds. Again, if your business is already an established one, you may require additional funding for business expansion. Business funding may also be required to help you pay the bills during a crisis period. However, before applying for small business loans, you need to consider certain factors.
• Prime Business Funding Source: Banks and credit unions, in most cases, serve as the prime fund providers for businesses. The small businesses looking for funding usually approach the banks and credit unions for small business loans. They usually start with the banks with which they have accounts. If you have many accounts with a particular bank that has a good reputation in the finance industry, you will easily get business funding. The bank will treat your application for business loan as an opportunity to make money. The bank will easily sanction the loan because it knows that you can handle your business finances well. Moreover, having a business account will help you grab the attention of the lenders and financial institutions offering small business loans. Before opting for loans, make sure that your business is registered with the Secretary of State website and also with a 411 national directory. The financial institutions and banks usually check the documentation to make sure that you are a real business and have the evidence to back it up.
• The Industry You are In And Your Business’s Size: Before you approach a bank or credit union for business funding, you should take into account the size of your business and the industry you are in. There are certain industries that are not liable to get small business loans because these industries are considered to be high risk industries. Before registering your company, you should be aware of the SIC codes that are treated as high risk for most banks and financial institutions. You need to make sure that your business does not belong to the high risk category.
• Lenders Check the Borrowers Credit History: It is important to keep in mind that your credit history will probably be checked by the bank before it sanctions the loan you have applied for. Thus, if you have a bad credit history, the bank might not grant the loan. Even if you have necessary assets and a good history, you may need to sign a document ensuring that you will pay the loan back within the stipulated period.
Do not make the mistake of mixing up your personal credit with your business credit. With a good business credit file, you can even acquire double or triple the amount you are eligible for getting under personal credit.
All the aforementioned factors need to be taken into account by the small business owners who need business funding.