A Business loan could provide you with the capital needed for expansion, or cover in advance of key seasonal spikes.
To ensure you’re applying for a loan in a responsible and secure fashion, it’s crucial to have a clear understanding of a loan application process and all the requirements that must be fulfilled in order for loans to be made and repaid.
Join the Esme experts as we run through all the dos and don’ts of business loans, including what you should and shouldn’t do before applying for your loan and after receiving it.
Before applying for a business loan, it’s essential to have a total comprehension of your business’s cash flow – that is, the combination of your business’s income and outgoings.
You’ll then be able to determine what your business could realistically afford to pay back each month, without falling under financial strain. This will then help you decide a repayment term that works best for your monthly budget.
Many online lenders offer a business loan calculator, which is useful if you want an idea of the end figure you’ll be paying back and how much your monthly repayment could be, including interest and fees.
It’s always a good feeling when profits are high – whether it’s seeing a busy shop-floor or having your services be in high demand.
Before applying for a loan, it’s vital to research thoroughly, ensuring that the option you’re choosing fully suits your business’s financial situation and cash flow.
Choosing the right lender is equally as important. If receiving the loan is time sensitive, you should consider the lender’s application processing time and how long it could take for funds to be transferred.
It’s also crucial to be proactive in verifying a lender’s legitimacy. To learn how to find a legitimate online lender, read our blog post, ‘Are online business loans safe?’
Every business has a credit score – which works the same way as a personal credit score.
If you don’t repay your loan within the term of your agreement, your business credit score could be at risk, which may impact any additional applications for business finance in the future.
You can check your business credit score for free with Experian.
Many loans involve restrictions on what you can and can’t spend the loan on. A business loan, for example, should only cover general business purposes and therefore can’t be used for personal expenses. Alternatively, asset finance can only be used to purchase an asset, such as a vehicle or equipment.
In fact, many loan application forms require you to give a short description of how you intend to spend the loan. This plays a deciding role in whether or not your application is approved, and lenders will often make you contractually obligated to use the loan for your said purpose.
It’s crucial, then, to be fully aware of what you’re able – and unable – to spend your loan on.
Every lender will have eligibility requirements that prospective borrowers must meet in order to be applicable for a loan.
It’s essential to check these through thoroughly before making an application. It’ll keep you from wasting time making applications you’re ineligible for, while ensuring you’re only applying for loans that are right for you! To get an idea of how much you could borrow from Esme, apply for a quote here.
When thinking about taking out a loan, it’s understandably tempting to only visit your local bank. They’re likely conveniently placed and definitely a trustworthy provider.
With that said, there are many different kinds of responsible lenders who you could also take out a loan from – and the chances are that many of them may offer a much better deal for you, with better interest rates, benefits, and more flexible repayment terms.
As mentioned previously, just be sure that whoever you’re applying to is a verifiable and secure lender.;