Applying for a loan can seem a little daunting, especially if it’s your first time. You want to make sure you’ve done everything right before you make the application, so you get the best possible chance of receiving a loan that’s right for you.
Here are some key things to keep in mind when you’re thinking about applying for your first loan.
Which loan is right for your business?
There are so many different types of loans available to small businesses. It’s important to do your research so you know what kind of loan to look for.
The first thing you need to think about is how you want to use the funding. What do you need the loan for? Different types of loan will cover different business goals, so make sure you have clear goals in mind before you get started. They might include business growth, new equipment or inventory, or taking advantage of unexpected business opportunities.
Whatever the goal, just be sure you know what you need and how much funding you need to achieve it. This will streamline the process from the get go.
Can you afford it?
You need to be sure that you’ll be able to pay off the loan when the time comes. After all, nothing comes for free.
You can use a business loan calculator to give you a clearer idea of whether or not your loans and goals are financially possible. You could also perform a rough debt service coverage ratio (DSCR) analysis using your company’s financial statements. This will show you how much cash your business has available to service its debt.
You need to make sure you can afford the loan fees in your budget too. That means understanding the loan’s cost, as well as it’s term and repayment structure. Also bear in mind any hidden costs such as administration fees, late payment fees and guarantee fees.
Prepare your paperwork
Applying for a loan is a big deal. No-one’s going to give you money without knowing you’ve got all your loose ends tied up. You need to show the lenders you’re a reliable business. This is a safe investment for them.
Different lenders will have different requirements when it comes to the documents and forms you’ll need to provide. Most will include bank statements, financial and management accounts, VAT returns, and details of the directors and financial managers, including proof of ID.
Seek support if you need it
One of the best things you can do before applying for a loan is asking an expert for advice. Consulting with your bookkeeper will give you a detailed insight into your financial situation, what kind of loans you should consider and what your business can afford. It’s much easier to make those decisions when you have all the right information.
At Numero, that’s exactly what we’re here to do. We’re here to help your business achieve its goals, every step of the way. Give us a call today to find out more about working with us.