Looking for a business loan? Follow these simple steps

Choosing the right financial partner to help you with your business credit may seem a daunting task initially. But it is a relatively straightforward process if you have a well-structured plan both on paper and in your mind. Your idea must demonstrate how well you put the money to use and eventually pay off the loan on time.

Many small and big businesses are in constant need of cash. It either supports their on-going business operations, starts a new venture, and funds long-term projects with positive cash flows. Whether it is to fund short term working capital requirements or to support long-term business projects, business owners look for easy-to-avail funding opportunities. It doesn’t matter if they are small or big money lenders as long as they offer business-friendly timelines and costs. In the ever-interconnected world we live in today, finding the right financial partner is not that difficult a task.

One has to look for business loans online, and there are many options available to choose from. To analyze the credit line, one must follow a simple step-by-step process to ensure that the money borrowed is put to the right use, and the company can pay it back within the agreed timelines.

Putting things in context and for clarity purposes looking for online loans is not a difficult task today. Just look it up online! For example, if you are a resident in New Zealand, you can search for ‘online loans in NZ’ to get the best offers for loans, interest rates, and repayment schedules.

It will also help you reviewing recommendations and avoiding any professionals who may seem reasonable but offer awful services.

Following is a simple guideline to help you prepare for finding relevant funding opportunities for your business or personal financial needs.

Step 1: Why do you need the loan?

It is the most crucial step. Once you have decided why you need the loan, the rest of the measures would not be difficult to follow. Before jumping off to looking for a loan for funding any part of your business, ask yourself this question: do you need a loan? It entails asking other fundamental questions about your need for cash. For example, have you already used other funding opportunities, which could be taking money from the retained earnings, asking from friends and family, and asking partners to pool in more capital?

Have you already exhausted other areas of funding your business needs? Have you decided that from all the available funding opportunities, taking out a loan seems to be appropriate? Are you sure that it is a less costly option? Finally, have you penned down how much loan do you precisely need? Do not just arrive at an estimate, be specific! If all the questions mentioned are answered with a yes, take input from stakeholders, and take out the loan.

Step 2: What Type of Loan do you need?

Some business owners, if not all, are likely to confuse their financial needs with other needs. For example, your business might need new equipment, and you think you can only buy the equipment you need if you can arrange for the money. There are multiple ways to have that equipment become a part of your business operations. For example, you can look for options where you can lease the equipment as well. This way, your business might not face the financial burden of paying back the loan and its interest. It might be a better idea in case the equipment is needed only for a short-term basis.

Step 3: Have a Plan to repay the loan

Most Businesses do not manifest the seriousness in coming up with a plan to repay the loan they take – mostly small business loans. The loan repayment schedule must be prepared with sheer sincerity and not with a whimsical attitude, e.g., “oh boy, we have taken such loans in the past, we know how to pay them back.” It requires strict scrutiny of the current business operations and the business’s capacity to forecast the micro and macro business environments in the future only to ensure its ability to earn profits and pay back the loan on time.

Step 4: Check for timelines and Look for partnership

It is for the businesses to decide on the timelines for repaying the loan. Alongside the timelines, corporations, small and big both, must also precisely calculate how much cost they can bear on a particular business loan. This method helps the financial partner understand how much they would be able to earn on their lending.

This exercise might involve preparing a timeline for cash returns on a particular project and discussing it with the lender. The more transparent the process, the better it is for prospective lenders to develop trust with you and your business prospects and projects. As opposed to considering your financial lenders as stakeholders in the business, consider them as your partners. They might offer more flexibility in terms of customized repayment plans and a lower fee.

Step 5: Creditworthiness, Personal Profile, and References

Depending on the size of the business and the loan, some financial lenders may ask for collateral. Such a strategy secures the loan provider if the borrower cannot pay back the loan. The people in the business seeking loans must be mindful that they might have to offer security against the loan they take out to fund their business needs. It requires business owners or people in businesses seeking loans to assess their creditworthiness with utter seriousness and assess themselves if they are eligible to take out loans. Moreover, small business owners and individuals need to develop a strong professional and personal profile to instill trust in their financial partners about the point that the funds their financial partners will provide will be in safe hands. A much better way to do this is to arrange for references from business partners, customers, and former lenders. In other words, seasoned business people must have a strong profile prepared at all times if they often come across the need to arrange for liquid assets.

Step 6: Look for easy options first

There is this perception that business loans come with a lot of unfathomed consequences, especially in the event when there might be a delay in paying back the loan or the incapacity of paying back the loan at all. Many financial lenders today offer flexibility and advice both. The search for the right lender has to be another significant step in the process. One does not necessarily have to join hands with a finance company that is not flexible for its business reality. There are easy options available too. Look hard, and do not lose hope.

Step 7: Exude Confidence

Business owners have to ensure that they follow all of the above steps before seeking out a loan. After that, all they need is to show genuine confidence in their business plans and their intention to pay back the loan within the agreed timelines.

Conclusion – Choose Wisely

Financial lenders also look for making money. They look for the best deals and best lending opportunities. However, their best business opportunity might not be your best funding opportunity. In a world where businesses exist to maximize profits, loan seekers should look for a win-win and not for a win-lose deal. The last bit of advice would be choosing wisely.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.