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Business loans can be a great way to secure the funding needed to start and sustain a business. In order to obtain a business loan, it is important to understand what types of loans are available, what criteria must be met to qualify, and the necessary steps to secure a loan.
First, it is necessary to understand the different types of business loans. SBA loans are guaranteed by the Small Business Administration with special terms, typically lower interest and higher risk. These often require collateral, business track record, and a strong credit history. Installment loans, by contrast, involve borrowing a fixed amount and having a repayment schedule of fixed payments. This type of loan is often more suitable for businesses that need a quick monetary aid. Merchant Cash Advance is a loan type based on the future credit card sales of a business. Payday loans are high-cost loans that involve borrowing a small amount of money and repaying it with a large fee.
The criteria for qualified for a business loan vary by lender and loan type. Generally, loan applicants must have a minimum annual income, own a business, demonstrate a successful track record, and have a good credit score. Lenders also assess the risk of loan defaults and may require a personal guarantee. Trust Capital likes to see 1 year in business and a minimum of $10,00 in average monthly revenue.
In order to secure a traditional loan, it is important to have a business plan which outlines the purpose and goals of the loan. The business plan should include detailed financial projections and an operational overview. Loan applicants should also have a complete understanding of their credit score, as well as a budget to demonstrate their ability to repay the loan. Additionally, applicants need to present copies of financial records such as tax returns and balance sheets. For a unsecured loan you only need to complete an application and provide your last 3 months of bank statements.
In order to know what business loan you qualify for, take some time to assess your financial standing, credit score, revenue, and the plans for your business. After determining the type of loan most suitable for your business, compare the different loan terms including interest rates, repayment schedules, and loan duration. Additionally, you should read through the terms and conditions of the loans to determine which loan is most convenient for you. If you don’t want to go through the work yourself Trust Capital is here to let you know what you qualify for.
Ultimately, it is essential to understand the different types of business loans, the eligibility criteria for each, and the loan requirements for securing a loan. By following these steps, you can make an educated decision on what business loan you qualify for.