What You Need to Know About Micro Loans and Other Funding Options

2015-03-02

Minyang Jiang

No business sails through from day-1 without ever meeting a rough patch of water. The difference often depends on whether the business has the financial resources to stay afloat. The newer the business, the tighter the funds, at least in most cases. But any business might need a boost from time to time. And that’s where a small business loan or microloans can be great options.

If you’re thinking about a loan but don’t know where to start, here are some of the important points you’ll need to consider:

Why Do You Need the Money?

One of the first questions you’ll likely be asked is why you need a loan. What will you buy, what will you secure, or what opportunity will you take advantage of. Depending on the lender, you might have some strict criteria to meet.

And not all lenders will lend for every purpose. Ty Kiisel explains at Forbes magazine that lenders might be wary about lending money if you’re not forthcoming about what it’s for.

Do You Have Any Collateral?

Collateral is an asset that you own free and clear that’s used as a security for the loan.

For example, if you have assets worth a certain amount of money and you agree to place them as collateral, the lender knows that those assets could be used to repay the loan if you can’t repay it on the agreed terms.

How is Your Credit?

Your credit score is one of the most critical aspects of getting a money loan. The better the score, the better the terms, including the percentage of interest that you’ll pay. Some lenders are quite strict on their requirements.

So if your credit isn’t yet established, or if it’s not so great, some lenders might be out of reach.

How Much Paperwork Can You Handle?

Some loan applications seem to ask for everything but the birth-date of your great uncle Lou. An SBA loan, for example, requires profit & loss statements, personal financial statements, business financial statements, tax returns, a copy of the business lease, and many other documents, according to Business News Daily.

If you don’t want such an involved process, an alternative lender might be easier to work with.

How Urgent is Your Need For Capital?

If you need a loan that will fund quickly, the SBA is probably out of the running straight off the bat. A traditional bank loan might get faster approval, and non-traditional lenders might come through faster still.

For speed, you might pay a little more in the long run. But when you need a loan quickly, getting the funds fast can be worth a little extra.

Is Your Business in Good Shape?

Getting a loan can help you stay in business. But if your business has had some financial problems, you might have a more difficult time securing a traditional small business loan.

Repayment is how a lender makes its money. So a profitable business will have less trouble getting a small business loan than one that’s been struggling.

Any business could need a small business loan, and for a lot of different reasons. Moving to a new location, buying new equipment, updating technology, expanding the scope of services, and taking on new employees are all reasons why a cash-strapped business might look into a loan.

Credibly offers small business funding solutions on friendly terms that work for a wide range of business owners. Pre-qualify now, and set your sails for a brand new phase of growth and stability that can last well into the future.