5 Questions to Ask Yourself When Looking for a Business Loan – GuideNov 14, 2019
For many South African businesses, external finances help them to expand and cover a myriad of expenses. However, obtaining a loan is tough due to all the procedures and requirements banks have put in place for businesses to fulfill. If you’re a small business, it can get much harder to find a loan. Fortunately, there are some things you can do to give you a better chance of obtaining one.
Here are five questions you should ask yourself to help you get a business loan:
1. Why do I need the loan?
It is vital to know the reason you need the loan. Are you starting a brand new business? Do you need the money to cover your expenses? Are you looking for a pool of funds to finance your growth? Whatever reason you may have, you’ll have to tell the lenders why you’re looking for a loan. The answer will help them decide which type of mortgage works for you and if you even qualify for one in the first place.
2. Which loan do I need?
If your answer previously was to start a business, your chances of getting a loan will be minimal. Lenders usually only provide loans to companies that have been operating for a year or more and have a good cash flow. This stability gives the lenders peace of mind that the company will be able to keep up with the payments. Because of that, most, if not all, startups will not be able to be financed. If you are a new business, you’ll need to find finance elsewhere, such as borrowing from someone, using business credit cards, crowdfunding, and others alike.
3. Do I qualify for a loan?
First, determine whether or not you qualify for a loan is to know your credit score. You can find out what your credit score is from a credit bureau. If your credit score isn’t high enough to qualify for a loan, you’ll need to look for other means of financing, such as online lenders and microlenders. Second, determine how long your business has been in operation, as most lenders will only finance a business that has been operating for some time. Online lenders typically look for a company that has been running for at least a year, while banks only finance those with at least two.
4. Which lender should I choose?
There are many lenders you can choose from, such as banks and online lenders. Although they will all lend you money, some have different offerings—a line of credit, term loans, and more—and you may find one that suits you best. Once you select a lender and decide how you want to be financed, you’ll have to compare similar financing plans with other lenders. Do your best to look for the one that offers the lowest annual percentage rates while still allowing you to keep up with the payments.
5. What documents do I need?
At this point, you will need to gather all the necessary documents for the loan. Although different loans will have varying requirements, most will generally require you to provide bank statements, financial statements, and legal documents. Check with the lender first and ask which documents they require.
By following the tips we’ve provided, you’ll have the best chance of obtaining a loan. With all the necessary preparations done, you can enjoy a much smoother experience getting your business financed.
If you’re in South Africa and would like to take out an instant loan with no credit check, feel free to contact Hoopla Loans today! We’re happy to help.