a business loan can be very daunting. You might start your research from dozens
of banks and other alternative lenders who may be competing for your and
likewise others attention. Even if you are successful in narrowing down your
options you might get confused as this may be your first loan and you do not
know where to start from. We have tried to make the process easier for you.
Below are five steps explained properly for you to understand and make your
process of business loan easy?
first question that the bank or the lender is going to ask you is for what
purpose you need the loan. Business owners may need the working capital for an
array of purposes and others may need for specific purpose like to buy certain
piece of equipment. Take your time and decide what kind of financing you need
as the need will drive you to lender and loan type.
Following are the general reasons for loan like:
Starting a business
Buying a business
Day to day working capital
Cover cash flow gap
Growth of the business
Calculating financing that you
amount of capital for achieving your business need might not match up with what
you can afford. If you take too much fund you can be caught in a pile of debt.
And if you go for less fund you may be missing the opportunities
signing the loan agreement the business calculator will easily tell you monthly
payment of your loan. For calculation all you need is the loan interest rate
and term. You can even do testing with the amount and see how your monthly
payment can change based on the size of the loan. You can even estimate that if
the incoming revenue will be able to cover the monthly payment or you may have
to reduce little of your loan amount. You should easily be able to cover all
your business expenses along with the loan amount interest.
can use the Debt service coverage ratio (DSCR) to see whether you can afford
certain amount of loan. Ideally speaking if DSCR is above 1 it means you have
cash on hand to cover the loan payment. If your DSCR is below 1 you need to
increase your business income or decrease the monthly expenses.
Browse different types of
next step should be figuring out which business loan will suit you. The main
purpose is to know which type of loan match the credit profile, your budget and
the reason you need the funds.
option could be:
Short term loan
Business lines of credit
Merchant cash advances
Gather your loan application
all type of loans comes with some paperwork requirements during the application
process. It is generally not easy to qualify for the loan. Bank requires lots
of documents because they closely inspect borrower and approve all who are most
qualified. Lots of there is at stake and hence they want to verify all your
business as well as personal information approving all the details you submit.
of documents you need to provide are:
Personal Credit score
Average bank balance
Time in business
Profit and loss statement
Apply for business loan
Once you submit your loan application to the bank or financial institute the lender will let you know if they have approved you.