Finance Loans

Securing Bank Loans for Small Businesses

Contrary to popular belief, there are very many financial institutions that are willing to fund small businesses.

While it has been a banking trend to prioritize large businesses, the trend is changing to accommodate the numerous small businesses that are mushrooming.

While a bank loan isn’t a type of coffee you just dip your hands into, it is one financial facility that can take your business to the next level.

Securing Bank Loans for Small Businesses

Do You Really Need A Bank Loan?

Sometimes, a small business may require additional capital to expand its output. The business may outgrow its current financial capacity and may need additional working capital to handle its new size.

Every large enterprise that started from the grassroots will have a history of stagnation at a particular point because the operation costs far exceeded the current working capital at that point, and ultimately had to seek additional funding to stay afloat.

Bank loans are potent tools in getting your business to the next level.

Before you are granted that loan, there are a couple of factors the lending institutions will consider. These will include your credit score, your outstanding loans if any, your current cash flow, how long you have been in business, your business assets and investors, if any.

These factors will inform the lender of your risk profile.

Credit Score and Outstanding Loans

Your credit report will inform the lenders of your ability to make timely payments. This will cover all lending avenues like vendor contracts, credit cards, and other informal credit facilities as well as other loans.

Any existing loans will also be considered, together with the current cash flow. If the current cash flow can sufficiently cover the existing loans and accommodate a new bank loan, then you may be approved by your bank for a loan.

All small business owners will have to review these factors, and plan appropriate actions to remedy potential leaks.

Otherwise, you may end up with the extra commitment of remedying these issues while still operating below optimum.

How Long Have You Been Operating?

It’s no secret that banks will favor businesses that are much older. The longer the business has been in operation, the less likely they are to default.

This isn’t convenient for small businesses since they will be at pains to compete favorably with older entities competing for the same facilities.

However, lenders are open to investing in small businesses that have maintained proper financial statements and accounting records.

These will stand in for your business’ lack of decades of experience, and most lenders will assign a relationship officer to guide it on better financial management, thus growing with the business.

Criteria Used to Qualify You for a Bank Loan

Bank Loans Are Financial Tools

There are unlimited scenarios on how a loan can help you, depending on the growth stage of your business.

Bank loans can help your business get more inventory, acquire professional personnel or expand your franchise.

It all depends on how far you want to go. If you have decided that you are going to the next level, then reach out and have a financial institution grow with you.

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