It is always best to have your own business. You don’t have a boss who will cause you problems, you are choosing the jobs yourself, and the profit is far better than any potential salary. However, it also has certain disadvantages. You do not have complete security, because things can always get complicated.
There is a bad period, the profit starts to decrease, and you even go into the red. And often you can’t influence the situation at all and fix it. The best example is the current pandemic of the COVID-19 virus, which has spread all over the world and caused damage to everyone. Everyone is losing huge amounts of money. However, large companies will deal with the whole situation much easier than your small business.
In those moments, often the only way out is a loan. This is a very good option that can get you out of trouble quickly, but even when you find a reliable lender, the process can be complicated. Or at least it seems so because you haven’t researched the topic in detail and you don’t know some of the basic rules.
So today we will give you tips on how to easily apply for a loan in 5 small steps.
1. Have a clear reason why you are looking for a loan
Every lender will want to know the details of why you are asking for money. This will affect the decision to approve the loan, interest and everything else. Therefore, be prepared to explain your reasons in detail in advance.
The most common reasons are that you have either run into financial problems for a variety of reasons. Some of them may be because you are doing poorly at the moment, others may have broken equipment and you have to repair it and that is very expensive. Or you have accumulated unpaid bills and installments. You may also have invested badly, so now you want to get rid of those problems.
Also, the reasons do not always have to be related to the problems. Maybe you just want to expand your business. To buy new equipment, expand production, expand the market you work in and many other similar reasons. Or you just want small aesthetic changes.
In any case, lenders need to know that it is safe to give you the money and that you will repay it within the agreed time. When you complete this step, you have already done a great job. Our advice to you is not to wait for a catastrophic financial situation, but that if you see clear signs that you will need money from the outside, start the process immediately. This way you will take a smaller amount that will be easier to repay, and lenders will be more willing to grant you a credit.
2. Determine the exact amount you need
Once you have a specific reason why you are taking the money, you also need to determine what the amount is. That will affect a lot of things. The size of the loan will dictate the repayment period, interest and whether you will get the money at all. If you ask for a huge amount, which is not realistic that you can repay, it is very possible that you will be rejected or that you will be offered a smaller amount of money than requested.
Even if they grant you a large sum, be sure that you need that much and that you will be able to repay. It is not a solution to get a lot of money now, and that will lead you to bankruptcy later. On the other hand, don’t take any less than you need. That way you will only make the situation worse. It will not cover the expenses you want, and you will be indebted. That is a very wrong choice. Therefore, do a detailed investigation of how much you really need, and in that way, it will be best for both you and the lenders, to whom it will be a clear sign that you are someone who can be trusted.
3. Take care of the paperwork
Now that you have completed such two important steps, it is time for the paperwork. Don’t take this step any less seriously than the previous two. Often it is bureaucracy and paperwork that can be an obstacle to solving your problems. So start collecting the necessary paperwork in time. Remember that you are not Amazon or Google that you can solve such things in a day. It is very possible that it will take you a few weeks to obtain all the necessary paperwork. Ask the lender in advance which paperwork is necessary.
Get them all and don’t overdo it, because they have enough paperwork even without cluttering them with unnecessary stuff. Some lenders ask for less and some more paperwork, so inquire in advance. What they are likely to ask you for include a report from the bank for the last few months, whether you have other debts, personal data, marital data, real estate ownership, a financial report of your business, etc.
4. Choose the right lender
It is very important to choose a company that is well known and has many satisfied customers. Never try to save money by working with some companies whose source of capital or legality of business is in great question. Also, the best option is to work with a company that specializes in small businesses, such as multiply.com.sg
5. Choose the right type of loan for you
There are various types, so you can make a big mistake if you choose the wrong type. Equipment financing is if you want to expand your business, commercial vehicle financing if you need new vehicles, and so on. Now you realize that there is a type for every need you need, so you have to choose the right one. Although there are options that are more flexible, they are not offered by all lenders and usually, the interest rate is higher in these cases. So if you have a clear reason, then choose just that type.
As it is likely that every small business will need a loan at least once, just follow these 5 steps and make a big step towards solving your problems.