Before applying for a loan, do your research. The best loan for your business will be based on your unique situation, but you’re going to want to look for a lender with the lowest interest rates and best terms. There are several different types of loans, including SBA loans endorsed by the Small Business Administration, standard term and fixed-rate loans that you pay back over a set period of time, and alternative financing options.
If you have a great credit score, some lenders may lower their interest rates to compete with other lenders, so knowing the market and your worth is critical to negotiating the best loan for your business. Consider some key preliminary steps that will help you obtain your small business loan, including compiling your business’s cash flow projections and organizing essential documentation.
Before you start spending your loan, make sure you have the cash flow or cash reserves to begin making payments. Set money aside into a business savings account, so you have some cash to start repaying your loan from the get go.
Look at your current and projected revenues, and from there, write out a realistic repayment plan that shows how you’ll use your loan money to increase your revenue and how you plan to pay back your loan balance over the loan’s term. You can always take out loans with asset collateral, but it’s better not to risk your personal property in the event that you can’t repay the loan.
More than likely, if you’re in a position where you need a loan to support your business, you’ll ultimately need to acquire new customers to grow your profits and increase your market share. Set aside some loan money to invest in strategic marketing initiatives. Get creative with it – expand beyond local television and radio advertisements, and your marketing efforts don’t have to be expensive, grandiose undertakings.
Consider growing your social media presence, joining community organizations, and giving your website a refresh, as potential customers are always searching on Google for “near me” businesses and services. When it comes to using your loan to invest in bettering your small business, make sure you’re making an effort to get the word out.
We know how hard small business owners work. From balancing your own books to managing everyday operations, and still trying to sell your products or services, you have to wear a lot of hats. With some extra cash from your loan, consider bringing on experienced help. Hiring doesn’t need to mean a full-time employee with benefits and long-term implications. You can hire contractors, part-time employees, or freelancers to help you manage tasks more efficiently and let you get back to managing your business.
If you already have great talent on your team, consider investing in training and professional development. Investing in your staff is a win-win: They’ll feel more valued and connected to your business, and the training will improve their expertise and productivity.
If you qualify, it may be a smart move to consolidate your debts and simplify your financial obligations. If you obtain a business loan with a better interest rate and terms, use some of the money to pay off outstanding loans or debts with higher interest rates or less-favorable terms.
Consult a professional, whether that’s your personal loan officer or a third-party financial expert, to determine whether consolidating your existing debt is the best move for your small business.