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How to get small business loans

Traditional banks, as well as credit unions, have changed their standards of loan lending, which has made it a bit difficult for small business owners to get funds. If you are a small business owner, you should be aware of the factors which determine your chances of landing a loan for your company. Following are some important aspects that can help you get small business loans easily.

Credit score
As a small business owner, it becomes imperative to keep your personal credit score as high as you can. However, small business loans usually consider the personal credit score of any business owner which maintains for about 20 percent or more interest in the company. By using the current alternative lenders, a borrower usually gets a loan with a credit score that could be as low as 500. The best rates for small business loans are provided to the borrowers who have secured an excellent credit score (720 or higher).
Borrowers having a high credit score usually visit their local bank and get qualified for a loan. Several people with low credit still make use of alternative lenders. This happens because of the quick and easy funding. Loans for the low credit borrowers are usually in the form of an Automated Clearing House (ACH) or Merchant Cash Advance (MCA). The loans typically rely on the monthly revenue of the business bank account or merchant processing account. These kind of loans are available at a high cost to the borrowers, and the rates are as high as 80 percent APR.
Always keep in mind that while taking an ACH or Merchant Cash advance, no matter how good your credit is, you are still paying a high rate. Hence, such kind of funds must only be used as a last resort and in case, or when cash is required quickly within 1 to 3 days and can be repaid promptly.

Time in business
A business that has been operating for a lesser period than two years is considered as a start-up. The start-ups are generally not eligible for a traditional bank loan. While, banks usually require businesses to be operational, i.e., at least for two years before they lend loans to these businesses. The alternative loan lending marketplace has changed the standard and businesses which have been operating for at least 3 to 4 months can get funds. The cash provided has been based on the firm’s monthly revenue. As long as you handle your business operations smoothly, you can expect more loans from them. A business that has been operating for more than two years will get a great chance to receive funding. These funds are available at a lower cost, and when two-year mark businesses get over, you will become qualified for more traditional and structured term loans.
Businesses which have been operating for a lesser period than two years will have to pay a higher APR. This is because small businesses are considered to entail a higher financial risk. If possible avoid borrowing money in your first two years of business. You can steadily expand and strategize your company. However, if you wish to acquire funds, always ensure to get the high cost that blocks your operations from the low monthly cash flow to pay back their funds.

Monthly revenue
Small business owners who are not able to operate well, may be in need of minimum two years to generate a monthly income of $5,000 to qualify for the funding. The funds that are available during this period in their business depend upon their financial performance so far. The average daily balance that you maintain in your bank account would make them know how much money can be provided to you and paid within a specified period. While, any business which has an average daily balance lesser than the entire monthly amount, would not get qualified for the amount they are proposing for. They provide fewer funds which are maintained by their monthly payback amount.
Collateral
There are different kinds of collaterals that can be used to assist you to get a loan. The type of guarantee usually relies on which type of loan you actually get qualified for.
Deposits
The deposits normally depend on your business bank account which has been one of the few assets that every new business must have.
Home equity
Suppose you own a residential property and have got any equity, it can be easily accessed with a home equity line of credit. However, you can even refinance your home and get cash to get the desired value allowed by the loan lender. You can easily sell the property or refinance it to access the equity. However, the home equity line of credit will not be offered on the assets which are related to the investment.
Equipment
Business owned equipment can be readily used if you wish to receive fast cash. Several companies lend equipment on lease, which leverages a sale-lease-back on the equipment which is owned. This allows you to sell your equipment or tools to the company that involves in equipment leasing.

The ways mentioned above can effectively facilitate small business loans for entrepreneurs.

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