Best Strategies for Your Loan Applications

Best Strategies for Your Loan Applications

Best Strategies for Your Loan ApplicationsYou may need a loan to expand your business, undertake a marketing campaign, purchase equipment or a building, or for some other very good purpose. Borrowing money for business is a common practice, but how to do it isn’t commonly understood.

How do you go about deciding which type of loan is best? What documents do you need? How much debt can you afford to carry? How do you go about the application process?

Loan options

There are many types of loans and it’s important to apply for the right one. The right one depends on what you need the money for and how much money is involved. For example, if you need immediate cash but sell only to consumers, then factoring isn’t the right type of loan for you.

Here’s a list of the various types of loans to consider, depending on your needs:

  • SBA loans are loans made by banks and other lenders which are guaranteed by the U.S. Small Business Administration. There are different SBA loan programs (e.g., working capital loans repayable up to seven years; real estate purchase loans repayable in 25 years).
  • Term loans to receive a lump sum that is repaid over a set period. These are regular business loans from banks, credit unions, and online lenders and range from microloans (e.g., $500) to substantial capital (e.g., $1,000,000 or more).
  • Lines of credit which allow you to borrow up to the limit of the line, paying interest only on the amount used.
  • Equipment loans to finance purchases or leases of equipment or vehicles, with repayment periods tied to the life of the equipment.
  • Factoring, which is a financing method based on business customers’ invoices (you receive cash now at a discount to the face amount of the invoice).
  • Merchant cash advances, which are based on monthly credit card payments.
  • Personal loans from owners (such as borrowing with a home equity loan or with retirement savings), family, and friends.

The interest rate you pay on the loan depends on the type of loan you need and your credit worthiness. A term loan will have a fixed rate for the length of the loan, while a line of credit will have a variable interest rate that usually adjusts monthly.

Loan application process

Once you’ve decided on the type of loan that works best for you, begin the application process. Again, the time involved in application preparation and waiting for approval can vary considerably. Be prepared to provide financial information about your business and, depending on the type of loan and other factors, financial information about yourself. Other questions that arise in the loan application process include:

  • Is collateral required?
  • Do I have to give a personal guarantee?
  • What fees and other costs are involved in the loan?
  • How long is the time from application to approval?

Typically, you apply for one loan and wait for a determination—yes or no. If you are turned down for a loan, you then submit another application with another lender and hope for a better response. Recently, a better way to apply has emerged.

FINSYNC’s loan application process is dramatically different and easy to use. Instead of serial loan applications, you submit a single online application that is shared with lenders in FINSYNC’s network. (There’s no cost to you for this application.) Potential lenders that match your needs receive immediate notification of your interest in borrowing and then proceed to contact you and complete the application process. You save time with a single application and may receive funding in as little as 24 to 48 hours.

Conclusion

Using debt to finance your business is a great option in the right situation. You get to deduct the interest (limitations may apply). And debt is less costly and less permanent than equity financing where you must share ownership with investors. But obtaining that debt is a process, so understand what’s involved and how you can simplify and accelerate the loan application process.

This post was created in collaboration with FINSYNC. All opinions expressed in this post are my own and not those of FINSYNC.

3 comments

  1. jyoti atoliya 28 May, 2019 at 09:20 Reply

    hello,
    thanks a lot for sharing these article .I really need a good advice before taking my loan . these blog provide me efficient information .

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