Small Business Loans
Small business loans is sometimes difficult to secure and it’s even more difficult for an infant business to secure one.
On this guide we are going to help you with ways of securing a business loan for your small business.
How does business loan work?
Small business loans are given to small business based on conditions outlined on the loan letter of offer given by financial institutions to small business . Small business loan is normally given within a period of time. A short term loan is given within one year. Long term loan covers a period of two years and above. Most banks offers loan to small business.
Generally the financial institution will require security for the loan and some institutions impose certain restrictions on the borrowers such as minimum permissible equity to debt and capital ratios. Some other form of restrictions includes limitation on the sales of fixed asset and payment of dividend. Don’t forget that your business cash flow can not affect you payment of loan interest. If you’re small business is making either profit or loss interest will still be paid.
What do I need to secure a small business loan?
No one build a house without having a house plan. This is also true for a small business loans. To secure a small business loan one thing you must do is to have a business plan that will show how the business will work, current or forecast income, cash flow and the business estimated budget. No investor or financial institution will be willing to give out money for a course they are not sure of.
Investors will also want to know your debt: equity ratio. They will want to know what proportion of equity and debt your business is using to finance its capital.
Banks or investors will also need collateral from you in order to give out small business loans. Collateral are properties or assets that are offered to secure a loan. If payment for the loan is defaulted the collateral will be sized.
You have to fill out a loan application before a small business loan can be considered. Before filling the application make sure you take you time to read the terms and conditions of granting loan.
If you don’t understand the agreement for the small business loan stop, don’t sign your company lawyer will be a good source of help.
Small business loan application
You can get your small business loan from the following sources;
Have A Great Story or a Question About This Topic?
Do you have a story or a question about this? share it.