Small Business Lending: Some Questions to Consider
By Craig Gocken
Nearly every small business finds itself in need of financing at some point. Maybe you are just starting your business and you need some capital to keep things going at the beginning. Or maybe your business is considering the purchase of a building. There are many good reasons to borrow money. Likewise, there are also many good lending options. How can you know which option is the right one for your business? Here are a few questions to consider.
How Much Money Do You Want to Borrow?
The amount of money that you intend to borrow is a basic question that will affect the types of loans for which your business can qualify. In general, if you are seeking to borrow more money, you will be looking at longer-term loans. These will often require collateral or other assurance that you will be able to re-pay the borrowed money.
What Will the Loan Be Used For?
You’ll also want to consider what your loan will be used for. A loan used to purchase land or a building can be set up using the property for collateral. Similarly, business equipment loans are often set up in the same way. On the other hand, sometimes you just need extra cash to manage cash flow or to pay an unexpected expense. In these cases, a line of credit or a short-term loan are good choices.
How Long Will You Take to Repay the Loan?
Another question that you’ll want to ask is how quickly you plan to re-pay your loan. Do you plan to take 15 years or 15 months to pay back your loan? This will affect the type of loan you are able to get. Also, you should consider how this loan fits in with your overall cash flow strategy. If you have ongoing and intermittent cash flow needs, a line of credit is often a good option. It gives you the ability to borrow as needed up to your limit with flexible repayment terms.
What Will You Be Qualified to Borrow?
Ultimately, your ability to secure financing comes down to this question. If your business has a proven track record of success over several years, you will be able to borrow a larger amount. A new business or one that has a history of mixed success will have to work harder to show that it is a good risk. Having a solid business plan and a strong financial history for both you and your business will give you increased borrowing ability.
As you evaluate your own business needs and situation, you may find yourself with a few questions of your own. If you do, remember that we are here to answer them. Come in anytime and talk with me or with any of the branch managers. We’ve got the lending options you need as well as the extensive experience to help you make the best choice for your business.
