Whether it’s for a home project, starting your own business, or needing money for a rainy day, it’s difficult to know if you are ready for a loan. Regardless of the reason, you’re here because you’re considering a loan, but you’re unsure about taking the leap.
Doing home renovations or even starting your own business can be incredibly exciting. However, it can also be a bit daunting depending on the financial assistance you need.
Luckily for you, there are plenty of loan options out there and plenty of lenders willing to help you out. Whether it’s a personal, SBA loan, or even a line of credit, there are many loans out there to fit your needs.
To top it all of, you don’t always have to go to a bank for a loan. And fortunately for you, alternative lenders can often help you find the best loans at the most competitive interest rates. Even though loans can get daunting, they don’t have to be. As long as you figure out exactly what you need and why you need it ahead of time, the process is pretty simple.
Are You Ready For A Loan?
- How Much Funding Do You Need?
- Why Do You Need The Money?
- Credit, Cash Flow, And Collateral
- If You Run Your Own Business, How Long Have You Been In It?
- If You’re Starting A Business, What Industry?
How Much Funding Do You Need: Are You Ready For A Loan?
First and foremost, you should have a decent estimate of the funding you’ll need. Beyond that, it’s important to understand that different loans offer different amounts of money. However, even with the potential “maximum amount,” the money you will receive is ultimately at the discretion of the lender. So, while banks can typically provide a larger sum of money, you’ll likely have a harder time qualifying– with higher interest rates and collateral.
If you don’t need money in the six or seven figures, it would be a good idea to look into personal loans, startup loans, equipment financing, and maybe even lines of credit. So, if you decide you’re ready for a loan, alternative lenders have an application process that’s much easier than banks.
Why Do You Need The Money: Are You Ready For A Loan?
At the end of the day, you need to consider why you need the money and whether it’s absolutely necessary to get a loan. Once you know why you’ve thought about why you need the money, you then need to consider the best loan type for you. If you’re doing a home improvement project, a personal loan may be the way to go. However, if you’re making a startup, there are plenty of unsecured loans you can apply for.
Credit, Cash Flow, And Collateral: Are You Ready For A Loan?
Whenever you apply for a loan, lenders will look at your personal credit, business credit, cash flow, and collateral. They like to see a credit score of ~680+; however, they’ll look at anything between 600 and 800. As for cash flow, most lenders will look at your monthly revenue, tax returns, and current debt. When it comes to collateral, it’s just an option and not a requirement. Most loans from alternative lenders are unsecured, so you don’t have to worry. However, it’s important to know that when it comes to qualifying, lenders will only need one of the three options above.
If You Run Your Own Business, How Long Have You Been Doing it: Are You Ready For A Loan?
If and when you apply for a loan, you should expect to be asked how long you’ve been in business. For lender’s, time in business illustrates your success and will incentivize them taking a risk. Now, depending on the lender and the loan, the time in business can vary anywhere from 0 – 2 years; with two years being the usual.
Beyond time in business, lenders also like to know your business plan. Financial goals are a good thing to make apparent; however, you should also prepare a more in-depth proposal as well.
If You’re Starting A Business, What Industry: Are You Ready For A Loan?
No matter what industry you’re in, you’ll have to legally register your business. And to determine how you should register it, it’s important to take note of whether you’re running is solo, with a company, or if it’s another company alongside the one you already own. Lenders like to know the hierarchy of your business and whether it’s the only income you’re taking in. Beyond that, depending what business you’re getting into, you may also need licenses, permits, and certifications. Finally, if you work with suppliers, have partnerships, real estate agreements, and soon, it’s good to look at all of your current legal contracts.
If You Are Ready For A Loan, Finance Factory Can Help You!
Are you ready for a loan? Finance Factory would love to help find you one! If you’re looking for funding and have a credit score of 680 or better, let’s chat! Get pre-qualified right now with our quick-step pre-qualification form! And don’t worry, this will not result in a hard credit inquiry of sensitive information. We just want to learn more about you and your business. Click below to start!