Successful businesses of every size seek forward and upward motion to improve their business and stay relevant within the industry. Growth requires innovation, technological advancement, and capital, most importantly. Regardless of the stage of growth you currently occupy, a business loan for your Florida-based business will provide you with the capital you need to fund other business initiatives. Consider these six easy steps to getting the right type of business loan for your company.
6 Easy Steps to Get You to a Business Loan
These six simple steps will help you prepare for your business loan application. The goal is to make sure that you understand everything expected of you as a business owner and to know what you want from your lender. The more informed you are, the better chance you have to find the best loan for you.
Step 1: Know What the Lenders Want
There are some baseline standards for every type of business loan, but the best way to know what loan works best for you is to know what the lenders want from borrowers. Here are some common factors that most lenders look for on an application:
- The industry you are in and how long you have been in it
- Your personal and business credit scores
- Your business’s cash flow along with three recent bank statements
- The collateral you have available
Some lenders require more and some require less. It all depends on the type of loan you seek.
Step 2: Know What Kind of Capital You Need
There are many different types of business loans. You do not need to be an expert in financing to be well-versed in the different loans available. In Florida, small business loans are the most common type of loan because small businesses typically need capital from an outside source in order to grow. You should understand the difference between business lines of credit and a traditional business loan before deciding to apply.
Step 3: Understand the Requirements
Now that you know what lenders are looking for, start considering how well you meet the requirements. Lenders sometimes screen your application with a few crucial questions. How you answer them can decide whether or not they will even look at your application. If your personal credit score is low but your business credit score is high, do not apply for business loans that require a personal credit check.
Step 4: Collect the Necessary Documentation
Gather everything you need to complete the application. These might include any of the following:
- Business bank statements
- Legal contracts
- Tax returns
- Financial documents, including unpaid invoices and accounts receivable
- Any licenses or permits required for your business
It is better to be over-prepared, so collect any documents relevant to your business and keep them filed together.
Step 5: Choose the Lender
Not all lenders are created equal. Getting a business loan means creating a relationship with a lender. You want to make sure that the two of you are compatible. A direct lender is usually the most strict with qualifications. These lenders include banks and credit unions. If you search the lending marketplaces online, you can filter the search to find lenders using your qualifications.
Peer-to-peer lending, such as crowdfunding, is also an option. This is a common source used by businesses that struggle to get a traditional loan. It is becoming increasingly more popular, but it works best for those that already have a wide network of connections.
Step 6: Complete Your Application
Traditional Business loan applications can take a long time if going through a bank. However, online lenders often have a much shorter application process that can easily be completed online from your home or office. If you followed Step 4 and gathered all the documentation that you might need, you have already completed the most tedious part of the process. Finish the application in one sitting if possible and be sure to respond quickly to any requests from the lender.
Types of Business Loans Available in Florida
Every type of business loan has its own pros and cons. Here are eight of the most popular loans available to you:
- Business lines of credit provide a predetermined line of credit from which you can borrow and only pay interest on what you have withdrawn. These are great for seasonal businesses that do not want a fixed monthly payment for an extended period, but they require strong, stable revenue.
- Term loans provide a lump sum of cash that is repaid over a period of time with a predetermined amount of interest. Online lenders typically offer up to $1 million in term loans and supply the cash faster than a bank would. This is a great option for borrowers that have an established business with good credit and available collateral.
- Business equipment loans are used specifically to buy equipment. These are best for businesses that want to own rather than lease their equipment. They usually require a down payment.
- Business credit cards are similar to business lines of credit. You can use the credit card as needed and repay monthly. They may include extra fees but can be good for ongoing expenses.
- Personal loans can be used for business and are a great option for startups. You need strong personal credit and income, and they can be costly.
- Small business loans, provided by the Small Business Administration through banks and online lenders, have repayment schedules based on their intended use. You can use them for capital, equipment, and real estate expansion. They have some of the lowest rates but often have strict qualification standards.
- Invoice factoring provides fast cash for unpaid invoices. It can be costly, but it is a great option for businesses with reliable customers on long-term payment plans.
For more information on how to get a business loan in Florida, contact Platform Funding. Once you know what your business needs and what qualifications you can meet you are ready to get funded in three simple steps!