Best Business Loans
Many entrepreneurs and business owners launch their companies with bootstrap financing. But for larger ventures, business loans are a necessity.
While factors like a good credit history and sufficient collateral certainly help, it’s important to understand which loan type and lender are best for your business. Further, it also helps to know you have options even if you don’t fit the traditional criteria.
Common Questions
Which loan type is best for your business?
The best loan for your business depends on many factors, such as how many years you have been in business, your revenue, and the assets you own. These and other variables will determine what rate and terms you receive, and whether your application is accepted. These are the most common reasons an application is denied.
Where do my business credit and personal credit scores stand (non-existent, poor, fair, good, excellent)?
Insufficient credit history is a leading reason for credit denial. If your credit is good on either the business or personal front, you will likely have access to both secured and unsecured financing options.
Unsecured options like personal loans are the most convenient but usually have higher interest rates than secured financing options. Be sure to consider both types to find the best deal.
If you lack credit, you will need to look into financing with collateral.
Does your business have any collateral?
Insufficient collateral is another common reason businesses are denied credit.
If you don’t have credit, figure out if you have any assets, or are going to buy any, that could be used as collateral for your loan. It will help you get approved and get a lower interest rate on your financing.
Here’s a look at the financing and credit products that had the highest rates of approval in a prior year according to the Federal Reserve’s Small Business Credit Survey (SBCS).
How long has my business been in operation and is it profitable?
Startups are in a different situation than established businesses. Many lenders will only grant loans to businesses that have been operating for at least a year or two, proving that they are stable and profitable.
However, if your business is just starting out, you still have options. You may be able to turn to merchant cash advances, invoice financing or factoring, SBA loans, and possibly venture capital.