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How to Apply For Business Loans
Business loans can be lifelines for businesses of all sizes, helping them to cope with seasonal fluctuations in sales or unexpected expenses. You can also use them to finance new equipment, inventory or a new office. The key is to make use of the funds in a way you can expand your business and not rely on financing through debt in the future.
Before you apply, consider how much capital your business requires and what type of loan can meet your needs. You will need to be aware of the time frame you will need to pay back the loan, as this can affect the interest rate and fees. Many lenders provide a one-time financing option or credit line with repayment terms that vary from one day to several years.
Most lenders will require you to provide a variety of documents, including your business plan financial statements, as well as your credit history. They may also ask for collateral, like equipment, real estate or money owed to your business (accounts receivable). Some lenders will let these requirements go for established borrowers, those with great credit, and those who require large amounts of capital.
Lenders will also evaluate whether your company has the capacity to repay the loan, using metrics like its fixed-charge coverage ratio as well as the amount of cash it is likely to generate each month. They will also check if it has any outstanding loans, and assess whether or not it complies with all legal requirements. Then, they will examine your industry to see if it is considered volatile or in an area that is stable.