Things to Prepare When Applying For a Small Business Loan

Do you have a brilliant business idea that you are sure to work? Or are you planning to expand your existing business? If you do not have enough money to finance your business, the best thing that you can do is to get a small business loan. Small business loans are credits that lenders extend to small business owners to start or expand their small enterprise.

However, getting a micro business loan is not as easy as getting an online personal loan. An applicant must prepare documents that can show that the venture can bring in profit to allow them to pay back the loan and the interest. The approval of the loan will depend on how you present your ideas and support it with reliable data.

Here are the supporting documents that you must submit along with your loan application.

Prepare a Business Plan

Before a lender decides to finance your venture, he would want to make sure that the enterprise that you are running is legitimate and that you are capable of making it profitable. The plan must include the aims of the business, the expenses and the revenue that you had in the past, and what you expect in the future, an analysis of the current market situation, and what you would do to make your business grow.

Your plan must communicate to the lender that you can make the business succeed. Once you finish your plan, write an executive summary. Potential lenders would read this first, and if they get interested, they would go over the whole plan and decide to approve the application.

Make a Financial Statement

The financial statement must include the expenses and revenues you had in the past years and what you expect to have in the next three or five years. Use the financial data in the last three or five years to project futures expenses and revenues. If the estimates show that your revenue would go up in the next three years or five years, you might get the lender’s approval. You must include your plan on how to use the money that you borrowed to finance your business.

State the Purpose of the Loan

Lenders would want to know how you intend to use the amount that you borrowed. Itemize all expenditures such as equipment, building costs if you plan to put up a new establishment or extend an existing one, the number of people you need to hire, and other operating expenses. Before writing down everything, survey several lending companies to find the best prices, which is the lowest. Lenders could see if the items in your list are overpriced and might not approve your loan.

Consider Collateral

Some finance companies would require collateral to secure your loan. Before submitting your application, check if the lender requires collateral. If you have a property to offer, then, you can proceed with your application, but if you do not own anything that you can use to secure the debt, look for a bank or lending institution that does not ask for collateral.

Check Your Credit History

Most banks and finance companies would require you to submit a credit history. Businesses that have been operating for years already have credit records. For a new company, the owner’s credit record could be used as a point of reference. The lenders would want to make sure that the entity or person applying for the loan is reliable in meeting financial obligations.

Undesirable credit history might hamper the approval of your application for financing. Build a glowing credit rating first before applying for a business loan to increase the chances of being able to get credit. Prepare bank statements and tax returns during the previous year and include these documents when you submit your application.

Have a Clear Idea of the Cost of the Loan

Borrowing money to finance your small business can cost you in terms of interest. Make sure that you understand the interest rate and the type of interest. Some financial institutions would offer a fixed interest rate or a variable interest rate. A fixed interest rate is the same throughout the repayment period while a variable interest rate changes depending on the existing bank rates.

After estimating the cost and the projected profit, you would see if borrowing money to finance the business would be beneficial.

Consider Your Options

Do your homework first by considering several lenders. You would have a better chance to get approval when you borrow from credit unions or small banks. Compare the maximum loan amount, interest rates, terms and conditions, and repayment options. Although considering several lenders might take time, your efforts would pay off soon.

With all the information and documents at hand, you are now ready to submit a small business loan application that has a bigger chance for approval.

The Easy Way to Make Improvements to Your Home

Purchasing a house is often a decade-long commitment, however, once you make the down payment and start paying the mortgage you will not only have a place to call your own, but also a highly valuable asset that you can use in your future financial affairs. Furthermore, regardless if you have paid or debt or not, it is perfectly reasonable to invest more money in your property.

This having been said, whether you want to acquire the funds to raise the value of your home before selling it, or you just want to make a few improvements to make your life easier, you may want to get a home improvement loan.

These loans have a very specific purpose and you will not be able to use the money for anything other than your home. However, they are considerably easier to obtain when compared to other types of loans. The only condition is that you have to have equity in your home. Generally speaking, the more your house is worth in comparison to your mortgage, the more likely it will be to get a great home improvement loan.

Home improvement loans

Unlike the process of refinancing a home or getting a line of credit, home improvement loans do not create an additional mortgage, however, they are considerably shorter and have very specific terms and conditions.

In other words, these loans are given for specific projects and have fixed amounts. Generally speaking, their duration varies from 5 to 10 years, and the equity in your home will be used as collateral for securing the funds. The more equity you have in your home, the more money you will be able to borrow.

It is also important to keep in mind that this is still a loan, and the terms and conditions that you are offered by the lenders will depend on your credit score.

As a rule of thumb, if you want to get a home improvement loan, first calculate the budget that you will need to make the modifications. After you do the math, shop around until you find a lender that has a good offer.

Equity if vital for a home improvement loan

A large number of people often prefer to make home improvements using personal loans, borrowing money from the bank, and then repaying the money over time. This course of action is not wrong in any way, however, it can put homeowners at a disadvantage in the sense that they do not use assets that they already have to get a better deal. Getting a home improvement loan is often cheaper than a personal loan, provided that you have enough equity in your home.

Although it is possible to get a home improvement loan if you do not have a lot of equity in your home, it can certainly help make things easier. If you have $40,000 in equity, you will be able to offer it to the bank as collateral for a $20,000 home improvement loan that will help you both improve living conditions as well as increase the value of the house. In many ways, getting a home improvement loan is an investment, allowing you to ask for more money for your house when you decide to sell it.

Equity makes you eligible and your credit score may make the loan cheaper

You will need to have a certain amount of equity in your home to make it possible to get a home improvement loan, however, the terms and conditions will still depend on how good your credit score is.

Contrary to popular belief, most lenders will always choose to see that you pay off your loan, rather than them having to take hold of your property. This means that you will have to do anything that you can in order to build up your credit score over time. Make sure that you pay your debts on time and that you do not use a lot of credit. Furthermore, having a history of borrowing money and then resorting to giving the lender your property as collateral will make it difficult to get a loan, even if you have a lot of equity in your home.

Conclusion

Getting a home improvement loan is often the best way to make expensive improvements to your house and increase its overall price. Furthermore, getting one of these loans is relatively easy, provided that you have enough equity in your home and a decent credit score.

When it comes to finding lenders, most individuals default to going to their local banks, however, it is also possible to get loans online. There are hundreds of web-based companies that offer home improvement loans and function similarly to banks, although their services can be a bit more expensive.