How to Get a Small Business Loan for Expansion
12 May, 2016 / Comments: Comments Off on How to Get a Small Business Loan for Expansion / By William Mahnic
Plain and simple—you need cash to operate your small business. However, the reality is that often your cash influx is erratic, making it tricky to meet your payroll or cover all of your expenses. Loans often play a significant role in the prosperity of small businesses, as they offer an instant supply of funding to ensure that business activity goes smoothly. However, a business loan is also an excellent tool for those who are looking to expand their company. If you are interested in growing your business, then obtaining a small business loan for expansion may be just the thing you need for your plans to be successful. Let’s take a look at how to get a small business loan for expansion.
The fees, loan terms, and interest rate costs vary based on the lender, and so it is critical that you take the time to compare all of your lending options before choosing one that is right for your business. Additionally, before applying for a small business loan, you should ensure that the potential profits made from expanding your business would be more than the loan’s total cost.
Create a Strategy
Before you head to a bank or lender to ask for a business loan, it’s highly recommended that you work to create a solid plan for expanding your company. For instance, if you want to open a second restaurant, then you should know exactly what it would cost you to purchase the new property. You should also know whether you would rent or buy the property. Know the property’s size and factor in the lease expense or new purchase. Don’t forget about the cost of hiring new employees, overhead and other such expenses that come with expanding your business.
Get the Paperwork Together
Make sure you are organized in regards to the paperwork. Your lender will want to see that you have the right paperwork along with your loan application. If you want to go through the bank you currently are dealing with, then they probably already have the copies of your articles of incorporation, insurance, financial statements, and licenses. Get into contact with the bank’s loan officer to see what other types of documentation they want to see. Additionally, you should have your federal employer identification number (FEIN) on your loan application and not your social security number, and so make sure you have ready access to that.
Apply for the Business Loan
You can apply for a business loan from any bank or lender of your choosing. However, you should consider the bank that you are already doing business with, especially if you have been content with their services. However, as a small business owner you may want to also consider borrowing from a bank or lender that specializes in small business needs. When turning in your application ensure that you fully explain what you plan on using the funds for and why securing a business loan makes financial sense. You should consider turning in an updated copy of your business plan with the expansion strategy included.
Ensure You Meet All of the Qualifications
In order to be granted a small business loan, you must meet your bank or lender’s minimum requirements. This includes not declaring bankruptcy for at least two years. Moreover, your business cannot be in the list of restricted industries. Some lenders require you to have a personal guarantee, which makes you liable for the loan that your business takes on. This will ensure that you are held accountable in the case that you are unable to repay the business loan on time. Due to SBA requirements, lenders often will take a lien on your company’s assets. If you’ve received an offer, then it is up to you whether you accept it or move on to the next. If the lender or bank does offer financing terms that are to your satisfaction, then close the loan as soon as you can.