Many small businesses take out loans to help them expand in their early stages. Getting that influx of cash at just the right time can help you to keep your business operations going strong and give you the ability to support your own expansion.
However, the choice to take out a small business loan is not one that you should make without careful consideration. Remember: you’re going to need to pay back that loan at some point, so you need to have a good sense of your ability to do so in the future before you decide to commit to a loan.
Here are a few things to consider before you decide to take out a loan for your small business:
- Your credit score. Your credit score will be one of the main factors that lenders look at before determining whether or not you’ll be approved for your loan application. Before you apply anywhere, get a credit report (there are websites where you can do this for free) and analyze it. If there are any errors, make sure that you contact your credit agency to resolve the problem. A good credit score is generally considered to be above 700, which gives you a better chance of getting a low-interest loan.
- Know how much money you need. If you aren’t exactly sure what your financial needs are, you may consider working with an accountant or financial advisor. Thoroughly document your expenses, what you wish to purchase with loan money and the goals that you have for the future of your organization. Be prepared to discuss all of this with potential lenders.
- Research your options. There are a wide variety of lender types that you will need to look into before making your decision. There are traditional lenders, such as banks and credit unions, and many nontraditional lenders as well. Investigate all of the options at your disposal before making any decisions about who you will borrow money from.
- Know there’s a chance you’ll get turned down. Getting denied on your loan application is not the end of the world; based on the reasons for denial, you will understand where you need to improve on your application before you try the next time. It can be a tedious process, but the end result will be worth it for your business.
For more information about what types of factors you should take into consideration before applying for your small business loan, contact us today at Fidelity Capital. We are pleased to assist you.