Getting a small business loan can be made simple if you work with the right lender. At Rockrose Realty in Florida, we have guided dozens of aspiring business owners to take out a loan for their new business. If this is your first business loan, you will need to narrow down your lender options. After that you’ll need to have the proper documentation and figure out how much financing to ask for. It is also beneficial to determine what rates and terms to expect out of your business loan. Our professional brokers at our Orlando offices recommend small steps to get you started.
It may seem intimidating, but all it takes is five simple steps.
1. Figure out why you need a loan
Chances are, you made the leap to start a business and you have realized that you don’t have the extra finances to do so. Even starting small businesses take careful consideration, especially if you decide you need a loan. It can be difficult to convince yourself to indulge in that small loan, but if your finances dictate you can’t make those spare investments, then you can discuss it with your lender. Whether you need it for spare equipment or capital boosting, your lender will want to know the specifics your loan will be used for.
2. Calculate how much financing you’ll need for your small business loan
Your working capital may not match how much you can afford to contribute. In this case, you will want to calculate how much financing you’ll need for your loan. You don’t want to end up in debt with over-financing and you don’t want to miss opportunities by underfinancing. Use a simple business loan calculator (found online) to help determine your goals. After that, you can set your Debt Service Cover Ratio, which can determine whether or not you can afford to pay off the loan.
3. Determine the type of business loan you want
Banks loans are great for business buyers with strong credit scores, with upfront collateral, or those with businesses that are greater than two years.
SBA loans are typical for buyers with high credit scores. They are typically more expensive than bank loans, but easier to obtain.
Medium-term Alternative Loan borrowers typically have a credit score of over 620 with their businesses typically being older than two years. This is a great loan option for borrowers who need money within one to two weeks.
Short Term Alternative Loans are for borrowers with personal credit scores over 500, businesses that are over a year old, and are in need of money within a day or two.
4. Gather all of your loan documents
A business brokers in Florida will state that the standard is, the harder it is to qualify for a loan, the more paperwork you’ll be issued. Banks closely vet their borrowers because they can give out loans up to 6 or 7 figures. You will want to provide (minimum) the following documents:
– Credit score
– Average bank balance
– Time in business
– Annual revenue
– Profit and loss statements
– Balance sheet
– Personal and business tax returns
5. Apply for your business loan.
Once you submit your loan application (either online or on paper), you will wait to hear for approval. Your loan will then enter the underwriting phase, followed by the loan agreement. Before signing, make sure you look closely for any hidden fees, as these will affect your APR.
Take these few small steps and the process of applying for a small business loan will make you feel more comfortable with the overall process. It ensures that you pick the right lender and you make smart choices in your favor. If you haven’t discussed business loan with a business broker in Florida, contact Rockrose Realty’s Orlando office to get more information on getting your business started!