Factors to consider before applying for a loan

Getting a loan for your business can be a risk and even difficult if you do not meet certain criteria. If you are considering getting a business loan, there a couple of factors to take into account to see if you qualify. 

Identify the use of your loan, some of the common uses are:

·         Free up day to day cash

·         Purchase inventory or equipment

·         Purchase Real Estate 

·         Purchase another business

·         Refinance existing debt

If your business is a start-up (do not have strong revenue or collateral) your best bet will be to use personal savings, find an angel investor or crowdfunding. If your business is generating revenue and has some collateral, a source of capital may be a commercial bank loan or private lender. 

Your credit, collateral and cash flow will come into play to determine what you qualify for. For example, a low credit score with no collateral means a lower probability of getting approved. Banks focus on businesses which are growing revenue and profit, have strong margins (which are consistent with your industry), have positive cash flow and the ability for your business to outlive COVID-19. Banks want to know how COVID-19 has impacted the business, so have a plan in place which shows how you have factored the impact of COVID-19.

If your business has been impacted from COVID-19 and your business does not qualify for a traditional bank loan, there are other options, such as loans which are funded by the Government.