Are you considering whether you should apply for a business loan? Just asking yourself that question is a good sign. It means you want to grow your business. And it also means you’re willing to take on some risk in order to do it.
That’s the right mindset to have. But it doesn’t necessarily help you make a decision about whether or not to take out a small business loan and how to find one that works for you.
In this post, we’ll walk you through why a small business loan might be the best way to set your business up for success. We’ll also explore the questions you need to answer to figure out if now is the right time for you to take out a loan.
Small Business Loans: There’s One For Everyone
It’s important to remember that not all small business loans are the same.
A five-year-old Mexican restaurant might need a different type of loan than a hardware store that’s been around for 20 years.
Some lenders have a lot of requirements that are very hard to accomplish, where others are friendlier. Camino Financial has fewer requirements than other lenders because we’re interested in working with a diversity of clients with different needs.
But before you make any decisions, let’s make sure you understand everything you need to know about what a loan can do for your business.
Why Small Business Loans Are a Great Idea
Get funds quickly
Many small businesses struggle to grow because they have low cash flow. They’re not bringing in —and keeping— enough cash on hand.
Even if profit margins are high, their expenses are often equally high, meaning they’re not retaining as much cash in their accounts as they would like.
Many lenders can process your loan applications quickly so you can get the cash you need as soon as you need it.
Set your business up for long-term growth
Businesses that don’t seek external funding tend to stagnate.
If you’re only using cash to pay for expenses and payroll, then the best case scenario is that your business will stay at the same level and profits will remain flat. More likely, though, if you’re not growing, you’re going to lose ground on the competition, and you will be at risk of going out of business.
Long-term growth requires additional investments outside of your business’ standard operating expenses.
By bringing in additional funds, you will have more flexibility to pursue more innovative strategies to build your business.
Perhaps you own a restaurant that does a lot of carry-out business, and you want to expand your dining-in options. The only way to grow is by adding more space and bringing in more tables. That all costs money.
So if you want to grow, you need the money to fund the necessary investments.
Take advantage of opportunities
Too often, businesses miss out on great opportunities because they don’t have the funds to take advantage of them.
Perhaps the restaurant next door to yours is going out of business, and you want to buy the space to expand your own restaurant. If you don’t have the cash needed to make the purchase, chances are high that someone else will.
Opportunities don’t wait around until you’re ready for them.
If you’re willing to take out a business loan, you won’t have to miss out on those great, once-in-a-lifetime chances to make your business even better than it already is.
There are numerous rewards and benefits of taking out a business loan. But there are risks involved, too. That’s why you need to make sure you’re ready for the responsibilities and requirements before applying for one.
Is This the Right Moment to Apply for a Business Loan?
Here are some questions you need to ask yourself to decide whether you’re ready to take out a small business loan:
Do you know why you need a loan?
When you take out a business loan, you will request a specific amount of money. The lender will want to know what you will use the money for, so you need to be prepared to answer the question.
Loans are most effective when they’re used for specific purposes. So even though you want to use the loan to grow your business, it’s important to know how the loan will help you accomplish that goal.
Do you know your credit score?
Your credit score will affect the terms and conditions of the loan you receive. It’s important to know this information in advance before meeting with a lender.
If you have a low credit score, certain lenders may not be willing to work with you at all or they may charge you high-interest rates to cover the risk that you won’t make your payments on time. If you don’t have a credit score, the same might happen.
Camilo Financial has a history of making our loan terms and conditions work for all clients, even those with no credit score.
So even if you don’t have credit score, don’t dismiss the possibility of getting a loan. And if your score is lower than you would like, you can always work to improve it. But make sure you have all the information before you apply for a business loan to ensure you’re getting the best deal.
Does your small business generate enough cash flow (after expenses) to cover the monthly payments of a loan?
Even though a small business loan provides you with funds, you still need enough cash flow to make your regular interest payments.
So if the cash you’re bringing in is just barely enough to cover all of your expenses and you won’t have enough left over to make the loan payments, then maybe this isn’t the right time for you to take out a loan.
You can learn what a loan’s monthly payments will be with a business loan calculator.
Will the loan have a good return on investment (ROI)?
Again, it’s important to have a plan in place for how you want to use the loan. If using the funds from the loan isn’t likely to help you grow your business or bring in greater profits, then it might not be worth taking out the loan.
Yes, taking out a loan provides you with funds —but it also adds an extra expense that you didn’t have before.
In most cases, it’s worth taking on additional monthly payments to get funds you need to grow your business. It’s just important to ensure that your plans for the loan funds are well thought out before you apply for a business loan.
If you answered yes to each of these questions, then the time is right for you to apply for a business loan. So how do you do it?
5 easy steps to get a small business loan
- First, do some research. Search on the internet for lenders who have requirements that fit your needs. Once you’ve found a few lenders that seem like they could be a good fit for you, then you can reach out to them.
- Next, you need to get all of your business’ financial information in order. Gather all the required documents together that the lender will ask for.
- When you apply for a business loan, you usually complete a short application form with questions about yourself and your business.
- If you are approved, you need to accept the loan terms by signing a contract.
- Finally, the funds will be directly deposited in your bank account.
Small Business Loans: The Key To Growth
For many small businesses, loans are essential, not only to grow —but to survive.
If you have ideas for how your business can expand, but you don’t have the cash on hand to take advantage of them, then a business loan might just be your best bet to get the funds and put that plan into action.
Small business loans can mean quick cash that can help you pursue short-term opportunities needed to grow your business over the long run.
Camino Financial has a strong and dedicated history of working with small business owners from different communities. Apply for a small business loan with us and get the funds you need to realize your dreams for your business.
If you apply for a business loan with us, you’ll find out why our motto is:
“No Business Left Behind”