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How Do I Find the Right Small Business Loan?

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Does your business need a boost in order to get started or to expand? A small business loan may be what you need. However, these loans are not easily obtained, and you could find yourself struggling to find the right one. Here are a few tips to help guide you to the right financing option for your small business.

Which Small Business Loans Are Available?

To find the best small business loan for your company, you are going to have to determine the best type of loan for your needs. Different types of loans will offer both advantages and disadvantages to weigh against the needs of your business. For instance:

  • Term loans offer a lump sum that can be repaid over a fixed period of time. This can allow businesses to plan for steady growth, but these loans can be inflexible.
  • Small business administration (SBA) loans can offer lower interest rates (which can save you money in the long-term). However, these government-backed loans can be hard to qualify for and the approval process can be long.
  • Lines of credit offer faster money and flexibility with a “borrow-as-you-need-it structure.” This makes credit lines handy for short-term expenses, but the borrower will have to repay the balance and interest as they go instead of in fixed installments.
  • Invoice financing can even out your cash flow, but it can be costly. This method specifically addresses cash flow issues, and institutions will notify your customers that their invoices are a part of this financing arrangement.
  • Business credit cards are another source of fast cash and you can repay it as often as you need to. However, these cards can have high-interest rates and require a lot of self-discipline to manage.
  • Merchant cash advances have no late fees, no fixed monthly payments or payoff dates. However, this financing option has high fees thanks to its repayment structure, and it is not as regulated by federal and state laws.
  • Microloans can be easier to qualify for and are usually offered by nonprofit lenders, which can be more flexible. However, these small business loans can be small, often up to $35,000.

What You Need to Qualify for a Small Business Loan

The process of getting a small business loan is more complex than if you were applying for a personal loan. Banks, credit unions and other institutions are going to expect you to have plenty of documentation regarding your business and personal finances. These institutions usually look for borrowers with a credit score of 680 or higher. They will also want to see your business’s credit score.

Financial institutions will also want to see your business’ financial records to prove that your business has a steady cash flow. Lenders often have a minimum annual revenue that their borrowers must maintain for approval. This requirement can prove difficult for newer businesses to meet, so they may need extra guidance when it comes to financing. Yet, companies that have been around for a year or more have a stronger chance of meeting these thresholds.

In addition to these financial statements, financial institutions may also wish to see legal documents such as articles of incorporation, commercial leases or other business agreements. They may also wish to know why you need a loan for your business. So, before you apply, carefully examine why you are pursuing financing for your business.

How Do Business Attorneys Help in the Small Business Loan Application Process?

Once you have prepared to apply for a small business loan, you will want to do some research on which lenders are going to provide your business with the best opportunities. You will need to take a close look at the fine print to ensure you aren’t signing up for more than your business can handle. This is where having an experienced business attorney comes in handy.

At Winghart Law Group, we help our clients review the terms of all sorts of business loans to help ensure that these financial products are in your business’ best interests. Our Redwood City business attorney, Andrew Winghart, familiarizes himself with your business and focuses on its needs. We may even be able to help you arrange your loan application, so your business is putting its best foot forward. For more information about what we can do for your business, call (650)332-2994 or fill out our contact form for a free 30-minute consultation.

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