07/07/2022: Small Business Owner’s Guide to Loans
Are you trying to get your business off the ground? Do you have an established company that is expanding, and you are ready to take it to the next level? Borrowing capital can help you invest in your small business in various ways, but it’s essential to understand the available options. This guide will help you get started with a small business loan.
Do You Need a Business Loan?
Before beginning the loan application process, it is vital to determine what you need and why. Ask yourself a few questions as you assess your business and consider the following:
- How much do you need?
- How will you allocate the funds?
- How will this help increase revenue?
- Do you have collateral?
- What is the financial health of your business?
An overall assessment will equip you for meetings and the loan application process. Be prepared with relevant facts or statistics that back up your request. If your loan officer knows you have a clear plan to use the money wisely and repay the loan accordingly, it will make the entire process smoother.
Types of Small Business Loans
As a small business, you have a variety of options for funding, including:
Business Line of Credit
A line of credit is a revolving credit option that allows you to access only the money you need when you need it.
Term Loans
Flexible loan terms and low-interest rates make term loans ideal for various business needs.
Commercial Real Estate/Construction Loan
Real estate loans help finance or refinance offices, warehouses, retail stores, or other types of commercial properties.
Small Business Administration Loans
Backed by the US Small Business Administration, SBA loans suit startups and established businesses.
Equipment Financing
Funding for commercial equipment, computer systems, or even office furniture can be achieved through equipment financing.
Agricultural Loans
An agricultural loan can provide customized solutions for your farming or agricultural business.
What Are Lenders Looking For in Borrowers?
When applying for a small business loan, your lender will consider several factors during the loan application process.
- Capacity – Your cash flow reflects whether you have the budget to repay the loan. If your loan officer can see where the money comes from and where it goes, it makes it easier to determine that you will be able to repay the loan. Will your business be able to absorb unexpected expenses or survive an economic slowdown?
- Capital – Lenders will look at your assets vs. your liabilities. They will also consider how much capital has been invested by you or outside investors.
- Collateral – Lenders will assess what you have to offer as collateral to offset the potential risk of small business lending. This includes inventory, equipment, cash, accounts receivable, and commercial real estate.
- Conditions – Lenders must consider factors such as the economy, pending legislation, or industry trends that may affect your ability to repay your loan.
- Character – Your personal credit history, your industry experience, the age of your business, and your integrity are all vital.
Grow Your Business with State Bank
If you need funding for your small business, there’s no need to be overwhelmed. At State Bank, we have been serving the entrepreneurs and leaders in the local business community since 1910. If you have questions about small business loans or which type of loan is best for your business, stop by one of our banking centers or contact us for more information. We would be happy to discuss your options to support your business goals.
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