You have goals. You have dreams. Small business loans may be just what you need for your Oregon and Washington business ventures.
Small businesses have long been considered America’s mainstay. Today, more than 33.3 million small businesses employ 45.9 percent of the entire U.S. workforce. Our world simply could not survive without small businesses.
Consider your most pressing goal: how could additional funding support you in making it a reality? You need working capital, money to get your idea off the ground. A small business loan may be exactly what you need.
Start By Assessing Your Long-Term Needs
As you monitor day-to-day operations, two metrics are critical to understand the health of your company: cash flow and working capital.
Cash flow measures how much funding a company generates or consumes during a given period. Working capital is the difference between a company’s current assets and its current liabilities. In other words, working capital showcases how well a company can withstand financial challenges and meet short-term obligations.
Analyze your current cash flow to understand how cash flows in and out of your business. Calculate your working capital ratio to determine if more capital is required. This should allow you to evaluate your accounts receivable and accounts payable to ensure customers are paying on time so you can turn around and keep your relationships with suppliers in good standing.
Do you identify any operational challenges that may impact cash flow as you work through this? A small business loan may be just what you need for your business.
Decide What Type of Small Business Loan Works Best for You
You can use small business loans for many different purposes. However, when you apply for financing, the lender will want details on how you intend to use the funds. Small businesses usually look for loans to fund:
- Commercial real estate purchases
- Equipment purchases
- Cashflow for everyday working expenses
- Inventory purchases
- Business acquisition
- Debt consolidation
- Expansion
- Marketing
Knowing your purpose can help you determine which type of small business loan will fit your needs.
- Your small business needs funding for day-to-day activities: A business line of credit may offer suitable financing. These flexible options let you tap into capital as you need it to cover various expenses. It gives you a safety net for when you need funding most.
- Your small business needs a large purchase or business expansion: Traditional term loans offer lump sum amounts you’ll pay back over time with fixed or variable interest rates. They have high borrowing maximums and may come exclusively designed for specific purchases, such as purchasing vehicles or equipment.
- Your small business is ready to purchase property: Whether you need owner-occupied or non-owner-occupied real estate, you have specific goals and needs. These long-term loans can offer you financing to continue growing your company, with various options depending on the property you’re purchasing.
- Your small business is in the market for an SBA 504 or 7a loan: SBA loans have specific requirements to qualify. An SBA 504 loan can be used to buy a building, finance ground-up construction or building renovations, or purchase heavy machinery and equipment. An SBA 7a loan is used for short- or long-term working capital for an existing business, refinancing current business debt, or purchasing new fixtures or supplies.
Determining If You Qualify for a Small Business Loan
The fear of rejection holds many small business owners back from finding financing. Do you have what it takes to qualify for a loan? There are a number of questions you can ask yourself before you approach a lending institution.
What’s My Credit Score?
As with personal lending requirements, a lender will want to ensure that the persons taking out the loan are trustworthy and reliable enough to repay the loan over time. Lenders offer the best terms to borrowers with good and excellent credit scores, which fall above 690. If your credit score is below that threshold, there may still be opportunities for small business loans. Try improving your credit score or shop for microloans or other opportunities.
Do I Make Enough Money?
Loans come in all shapes and sizes. While there isn’t a definite guideline for how much revenue your business must bring in, it should provide regular cash flow. History is everything. What can you do to prove you’re a reliable business owner?
How Long Have I Been in Business?
Lenders want track records to prove reliability. Depending on the loan, you need to have been in business for at least two years.
Can I Afford the Loan Payments?
While annual revenue is important, lenders will also consider monthly cash flow to ensure you can make monthly payments. Do you have enough to apply for funding toward loan repayments each month?
As a general rule of thumb, lenders look for a total income of at least 1.25 times your total expenses, including your new loan repayment. Lenders might also look at timing to ensure you can meet your obligations on time.
Applying for the Loan
The only way to find out if you qualify is to fill out an application. Each lender may have different documentation requirements, but in general, you’ll need:
- General business information: Business name, address, employer identification number, and possibly a business plan or proposal for how you’ll use the funding.
- Financial statements: Profit and loss statements, tax returns, bank statements.
- Business owners: Who will be responsible for the loan? Personal information will be needed for every person responsible for the loan.
- Collateral: If you’ll be using the loan for things like equipment and real estate, you’ll need documentation on how much it’s worth.
Some lenders allow you to start the process online or by phone, while others require you to complete it in person. Either way, spend some time getting to know the lender you choose.
Reach out to Riverview Bank to learn more about small business loan opportunities in Oregon and Washington. It’s the best way to start developing a relationship that can help you throughout the life of your business.