Thinking about taking out a small business loan? Before you decide to pursue a loan, it's important to think about all your options and assess the loans market thoroughly.
Today’s business loan market is very different from what it once was.
This is because banks no longer exclusively dominate the lending scene.
Alternative lending sources such as Love Finance have risen significantly in recent years and have been meeting the increasing demand of SMEs for funding.
Our job isn't just to get you any old loan, though; the goal of our business and financial advisors is to help small business owners and directors like you to get the right deal to take your business forward.
Below are some tips for you on how to work with lenders and improve your chances of getting the right small business loan for you.
1. Consider Every Small Business Loan Option
If you’re seeking a loan for a contemporary business, you cannot put your eggs in one basket when loan seeking. There was a time where banking groups were your only option for financing, but this is not that time.
It is fundamental for small business operators to be open minded, and they also need to be ready to give due consideration to all the loan facilities and the funding options available in today’s market.
There is no denying that the dwindling availability of funding from banks presents challenges to SMEs, however, it is great that alternative lenders are not only here but that they also offer specialist services in many cases.
Remember the idea is to get access to the funding you need with terms that are both convenient and realistic to your business. You must ensure that the option you choose is the most optimal and the only way to do that is to be aware of all the available options so a good call can be made.
2. Don’t Allow Headline Figures to Fool You
The first thing you need to understand about the business loan market is that lending facilities are aware of the strong demand for the credit options that they offer. While that doesn’t mean that finding suitable loan terms is impossible, you need to manage your expectations well in terms of low interest rates.
Headline figures are a marketing tool at best. The idea is to grab your attention with offers that seem too good to refuse, however, there is usually more to the story that isn’t immediately revealed. Unfortunately, many businesses only realise the full extent of what has been agreed to well after the contract has been signed.
In fact, it could simply be that the needs of your business do not align well with what appears to be a business saving deal. Whatever the case may be, it is important to collect all the facts before you agree to a financial arrangement instead of entering into said arrangement because of an appealing headline figure.
3. Leverage Your Assets
Sometimes the least risky and most beneficial thing a company can do is to leverage some existing assets to get access to funding. Using what you already own is always the best way to go where funding is concerned provided you have that option available.
An asset class such as that of invoices is often overlooked though it poses great benefits. Before an invoice is even settled by a customer, it can be sold for a price.
In fact, discounting and factoring of invoices are gaining popularity as they have been providing small business with alternative finance methods. Whenever cash flow problems arise and become a cause for concern, such sources of finance can save the day.
4. Maintain Honesty with Potential Lenders
There is no merit in hiding the truth about your organisation’s financial history if you are applying for any form of loan.
While there may be a few details you can hide, company credit reports are designed to ensure that key information on your finances is available upon request to relevant parties. It is in your best interest to be honest about your situation for more than just moral reasons. Doing so also allows lenders to properly assist you in figuring out the options available to you based on your unique situation instead of a situation you fabricated.
What is the point of getting a potential lender to evaluate a non-existent situation to come up with terms and numbers if it cannot help your business? If anything, it just makes your loan acquisition process longer than it needs to be.
5. Get the Right Business Loan Advice When It Matters
There are many situations in which it is beneficial for business leaders to rely on their intuition and their management skills. However, the business loan application process is not one where such an approach is recommended.
The chance of accessing a loan that is relevant and convenient to your business can be greatly affected by your willingness and ability to access the right advice at the right time.
The business loan market constantly changes, and third-party experts make it their duty to stay current. Therefore, these experts are well equipped to steer businesses in the right direction for the loan application process.
You only need a proper explanation of the options available to you. However, you get the benefit of a sound assessment of the advantages and drawbacks of each when you take advantage of expert knowledge.
Final Thoughts on Small Business Loans
Acquiring a small business loan is one thing. Acquiring a small business loan that is optimal for fulfilling your desired objectives is another.
Taking out a business loan is a risk and reward scenario, and you need to ensure you take the necessary steps to reap that reward and also don't take on more risk than you can handle.
Ensure that you review, understand and employ the five tips shared above for a better process.
Need more business loan advice? Please feel free to get in touch.