Taking out a business loan is a big step for any company; that’s why it’s crucial to get it right. If you are planning to take out a business loan, here are four questions you should ask yourself before signing on the dotted line.
1. What Do I Need the Money For?
This question is important because it’s one of the first things that lenders will ask you. If you have a detailed, convincing answer, that’s a sign that your business actually needs a loan. If you can’t pinpoint exactly what you’re going to do with the funds, and why you need them, that should make you ask yourself whether you want to borrow money just for the sake of borrowing.
2. How Much Money Do I Need?
Your work figuring out the previous question will determine your answer to this one. And if you think this is an obvious thing to ask, think again — you would be surprised to discover how many people can’t answer a question as simple as “How much money do I need?” when they apply for a loan. This is also one of the first things any lender will want to know, so you better have a good answer!
3. What Does My Credit Profile Look Like?
As you know, your credit history and the credit profile of your business can be deal-breakers when it comes to business loans. Before you start shopping for a loan, take the time to review this information. For example, in a recent study, 34% of consumers found errors on their credit reports. Make sure to correct any errors if there are any. If you have a low credit score, work toward improving it before applying for a loan.
4. Can I Repay the Loan?
Seemingly simple questions like this one can be extremely powerful, and save you a lot of headaches. Before you get a loan, sit down and run some numbers to arrive at a realistic answer. Keep in mind that not being able to repay a loan can have serious financial consequences for you and your business. If you determine that you can’t repay a conventional loan, there are other options available, such as factoring of accounts receivable and revenue-based financing.
MORE TIPS AND IDEAS
At the ONE Inland Empire Chamber of Commerce, we are always looking for ideas that help foster the growth of your business. Here are some previous posts to help you do just that:
- How to use social media to advance your career
- Cybersecurity basics for small businesses
- 3 Simple ways to protect yourself against identity theft
- Common grammar mistakes to avoid in your business emails
Interested in learning more about the ONE Inland Empire Chamber of Commerce? Contact us today by email (firstname.lastname@example.org), telephone (951-280-3902), or social media. We look forward to hearing from you!