Your Finance Options When Applying For a Business Loan

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Even during the best of times, small businesses often have cash flow problems. During this global COVID-19 pandemic, all types of responsible business owners are struggling to maintain solvency.

Why People Seek Out Small Business Loans

In spite of consistently strong revenues, you might not always have the cash you need on hand when bills come due. When your operating expenses are looming, you may need to find an immediate new cash flow or face fiscal disaster. Fortunately, you can currently find a lot of online options for meeting your immediate financial needs. Reportedly, the U.S. Government is issuing several types of emergency loans through the Small Business Association (SBA). Whether or not you qualify for an SBA loan, you may qualify for a business loan from a private lender. Generally speaking, these loans are available on relatively flexible terms. Thanks to the Internet, you don’t have to pin all of your hopes on traditional financial institutions. Almost certainly, you can access online loan sources that are eager and willing to help. When explaining this type of financing, it can be constructive to consider short-term business loans and long-term loans separately.

The Long-Term Business Loan

The long-term business loan is ideal when you need a larger loan. Companies typically use long-term financing to pay for larger structural investments. For example, you might take out a long-term loan when remodeling your store front or opening a second location. This type of loan is also commonly used for acquisitions and mergers. When you take out this type of loan, you may have up to a decade or longer for repayment. Because long term business loans represent greater risk, eligibility requirements are generally fairly stiff. According to the experts at Lantern Credit, “a credit score of around 600 or higher is preferred.”

Keys For Approval

The older and more established your business is, the more likely you’ll qualify for a long-term business loan (LTL). Before approving an LTL, the lender may look closely at your business credit, personal credit and a ratio called debt-to-income (DTI). Even with stellar credit, you might not qualify for a long-term loan if you’re already saddled with extensive debt. Your chances of approval are also impacted by the amount of collateral you have to offer.

Short-Term Loans: The Go-To Loan For Small Businesses

The short-term business loan (STL) is the debt instrument of choice for paying operating expenses. This type of loan is less risky for the lender. Therefore, a broader range of applicants are eligible. Though short-term loans carry higher interest rates, that’s a small price to pay for near-guaranteed approval. If you can show your business is healthy and bringing in revenues, you can generally qualify for an STL. You can further improve your approval chances if you work with an alternative online loan provider. Though just as trustworthy as your neighborhood bank, the best of these alternative lenders provide remarkable access and flexibility.

Compared to LTLs, STLs can be more expensive in terms of fees. After paying your application fee, you may have to pay ongoing service fees throughout the life of the loan. Certain lenders charge penalties when borrowers pay back their loans early. Generally speaking, STLs entail paying larger periodic installments. Despite these drawbacks, there can be no doubt that the STL is the go-to loan for the modern small business.

If you’re dealing with cash flow difficulties, you may be able to use a small business loan to get your operation back on track. Taking advantage of alternative business financing can help restore your faith in yourself and your business model.

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