There is a big difference between finding any business loan and the right business loan. If you a need a loan, you need to make sure you find the best product and price available to your business.
You can’t expect the right loan to simply appear before your eyes. It takes a bit of searching and decision-making to find what you are looking for. Fortunately, these 5 steps will put you on the path to finding the best option out there.
1. Start in Advance
Simply put, you should shop for a loan well in advance of when you will need the funds. Don’t underestimate the time it will take to find the best lender, complete an application, and close the deal.
If you think you will need a loan in the future, start the search now. This will give you enough time to find the best loan, as opposed to being forced into something that is not right for you and your business.
2. Know Your Options
Gone are the days of simple term loans and lines of credit. You now have more options than ever available to your business. Before you get started, make sure you have an idea of the product you want. Products are unique based on their terms, rates, payment structure, and collateral. You have to decide which type of product best suits your financing needs.
Here are a few of the most popular loan products available to small businesses:
Related Article: Business Loans and Other Funding Options
- Traditional Bank Loans and Lines of Credit
- SBA Loans
- Equipment Loans
- Short-Term Loans
- Medium-Term Loans
- Merchant Cash Advances
- Invoice Financing
3. Answer the Tough Questions
Every company that applies for a loan is doing so for the same reason: they need capital. Some need the money to purchase new equipment. Others need it to make payroll. And the list goes on and on.
While the end goal may be the same for every company, there are questions you must answer that are specific to your situation. The answers to these questions will make sure you find the best product and lender for your business:
- How much money do you want to borrow? Many lenders and products have maximum and minimum loan amounts, so you want to make sure they can handle your loan request.
- When do you need to secure the loan? Some lenders are able to fund borrowers in a matter of days, while others can take weeks or months. Generally speaking, the longer the term of the loan (and the lower the cost), the longer it will take you to secure the funds.
- Why are you looking to borrow money? If you need money to buyout a partner or acquire a new business, you will have a harder time finding a loan than if you wanted to expand your business or launch a new marketing campaign. Some lenders will only work with certain loan purposes, so you need to clarify this with any lender you’re considering.
- What other type of business debt are you carrying? If you currently have business debt, you may have trouble securing a 2nd loan. Not only does this tie up more of your cash, but many lenders may not want to take 2nd position to another lender. If you already have a business loan, be sure to tell the lender before starting.
4. Get Serious About the Application Process
Some business loan applications can be notoriously burdensome, so if you want to make the most of your time, follow these tips:
- Do your best to truly understand every question you are answering.
- Be truthful and accurate. Lenders will use documentation to verify your answers down the road.
- Be thorough, as this will lessen the likelihood of a delay.
- Provide any follow-up information that is requested as quickly as possible.
5. Get Multiple Offers
The best thing you can do for your business is get offers from multiple lenders, making them compete for your business.
With multiple offers, you have room to compare the advantages and disadvantages of each one, eliminating lenders until you make a final decision. Often, if you have an offer on the table from one lender, and you’re able to tell another lender that, you might be able to get them to lower their interest rate, or perhaps waive something like their origination fee. If they have approved you, and decided they want to work with you, there is absolutely no harm in negotiating to ensure they have, in fact, put their absolute best offer forward.
Don’t let anything scare you away from getting the small business loan you need. With these five tips, you can quickly, efficiently, and effectively find the best loan for your business. Just remember: the more prepared you come to the loan search, the better your chances of walking away with a stellar loan offer.
Author: Meredith Wood is the Editor-in-Chief at Fundera, an online marketplace for small business loans that matches business owners with the best funding providers for their business. Prior to Fundera, Meredith was the CCO at Funding Gates. Meredith is a resident Finance Advisor on American Express OPEN Forum and an avid business writer. Her advice consistently appears on such sites as Yahoo!, Fox Business, Amex OPEN, AllBusiness, and many more.