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4 Signs It’s Time to Apply for a Small Business Loan (and How to Get Approved for One)

by IBMSECU Marketing | Jan 23, 2018
 

Applying for a Small Business LoanIf there’s one thing most small business owners have in common, it’s drive. But, turning that drive into dollars is easier said than done. When you need to raise the capital to keep your business booming, a small business loan can help you reach your goals.

But, when is a small business loan the best next step? Although signs and circumstances vary from business to business, these four scenarios are good indicators.
 

Your Small Business Has Outgrown Your Current Space

When you started your small business, your garage may have worked like a charm as your factory floor, packaging plant and mailroom. But, all small businesses share the same goal—to grow—and that means the need to expand is inevitable. If you’re finding yourself rubbing elbows with your inventory in an overcrowded room, it’s time to consider upsizing your space.
 

You Need a Bigger Team to Manage Everyday Operations

In the early stages of owning a business, going at it alone made the most financial sense and allowed you the flexibility you needed to grow your business from the ground up. Soon, a time will come when taking on 100 percent of duties is simply not humanly possible.

As your operation grows, so must your team. Enlisting help is a big step—you’ll need to decide between hiring full-time or part-time employees and contractor positions—but a boost in productivity could directly impact sales and be the push you need to take your business to the next level.
 

You Need to Invest in New Equipment to Meet Demand

Speaking of productivity, updating, upgrading, or adding to your existing equipment can ramp up operations to let you keep up with your customers’ orders. Since most equipment purchases call for a large upfront investment, many small business owners opt to lease necessary equipment at a smaller, more manageable amount. However, a business loan can give you the on-hand capital to buy the equipment your business needs outright, which means a big write-off come tax time, not to mention potential savings over the years.

 

You Need to Increase Your Inventory to Fulfill Orders

Whether your business operates on a seasonal basis and you need to build up your inventory ahead of the busy season, or you’re one larger-than-usual order away from an inventory crisis, you need to be prepared. A small business loan can help cover the costs of purchasing products or materials to stock your shelves and keep your customers coming back for more.

 

How to Get Approved for a Small Business Loan

If your small business is sending you signs it’s time for a commercial loan, there are a things to know and steps to take before signing your application. If you need help getting started, here are three factors lenders look at when approving small business loans.

Know, Understand and Establish Your Business Credit Score

Although personal and business credit scores are two separate qualifiers, many business owners rely on their personal score to finance commercial needs. Not only does this blur the lines between your personal finances and entrepreneurial ventures, it means you’re not building your business credit score. A strong score lets lenders know your business means business, and can open the door to better loan terms, lower interest rates, and faster growth for your company.

Build Your Cash Flow

The amount of cash you have on hand plays one of the biggest roles in the small business loan approval process. Your cash flow gives lenders a glimpse into your business’ overall health—a high dollar amount signifies stability and growth, not to mention your ability to repay your loan on time. Building up your balance before applying for financing can get you the approval you’re looking for.

Write a Business Plan

Your business credit score and cash flow offer a view of where your business is today, but many lenders are also interested in what’s next for your company. A detailed business plan outlining your business’ value proposition, an overview of your market, and forecast of the future shows lenders you’ve thought ahead and are likely to pay back what you borrow.

Whether you’re ready to apply for your first commercial loan today or that step is far in the future, exploring your small business financing options is always a good idea. If you want more details about business loans, including commercial real estate loans, vehicle loans, business lines of credit, our commercial lending experts can help.

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