Nееd cash for your businеss? Applying for a short-term business loan could be an ideal solution. Tеll you what, you can usе this form of financing to takе carе of your short-tеrm payroll nееds. What’s more, the funds can pay for еmеrgеncy еxpеnsеs, allowing you to survive еconomic downturns.
But that’s what you should keep in mind. Successfully applying for a business loan can be straightforward or challenging, depending on how you do it. That’s why understanding what to do to еxpеditе this procedure and guaranteeing your loan’s fast approval is crucial.
This article will discuss the six steps to secure a quick short-term business loan. Rеad on!
1. Determine the Type of Loan You Need
When you require fast short-term business loans, you should first decide on the type of financing you want. You have various options to consider, depending on your business needs.
Among the most popular short-term business loans is a line of credit, which works like a business credit card. With it, your lender sets a specific credit limit, and your business can tap into it when necessary. You can repay the money you get from lines of credit in installments or once in full.
Another short-term business loan you could apply for is a merchant cash advance. This financing allows the lender to give you an upfront amount you will repay with a specific percentage of your credit and debit card sales. Therefore, whenever a customer pays for your product, the lender will receive a particular sum until you fully repay the loan.
Alternatively, you can get invoice financing, which enables you to borrow against your unpaid invoices. This type of short-term loan is ideal when you have a large and reliable customer base and may not qualify for other business loans.
2. How Much Do You Need?
If you have already chosen the type of short-term loan you want, it’s time to determine the amount to borrow. To do this, consider why you need the money. More often than not, entrepreneurs require short-term loans to start their companies, expand, increase cash flow, or buy work equipment. And in most cases, their needs vary depending on their businesses’ stage.
So, how can you estimate the correct loan amount? Determine the projected costs based on the plan you have for your business. For instance, if you want to open a new location, consider the amount it costs you to establish your current one. In addition, it’s smart to prepare financial projections to know the revenue you could earn in the future. This is important because it lets you know whether you can make repayments on time.
You should only proceed with the business loan application process when you decide the amount to borrow. Remember, your business could be in trouble if you ask for less. And if you borrow more than you need, your lenders might have second thoughts, wondering if you can repay the loan.
3. Ensure You’re Eligible
The next step to get a short-term business loan is to check your eligibility. In this stage, review the things lenders will likely mull over when reviewing your loan. These include the following.
Credit score and history
Every lender you approach will assess your credit score and history to determine your likelihood of repaying your loan. You can get your credit score by leveraging credit score services and checking your credit card or loan statements. Most financial institutions are also ready to give you a credit report with your credit history. Usually, the higher your credit score is, the greater the likelihood of fast loan approval.
Collateral and Personal Guarantee
Some lenders might require you to pledge collateral or provide a personal guarantee to lend you money. Collateral is usually a valuable asset, like a piece of equipment. On the other hand, a personal guarantee is like a partner, meaning if your business cannot repay the loan, they will assume responsibility.
Research your lender to determine whether they need collateral, a personal guarantee, or both. Then, ensure you have them before applying for the financing; it will increase your chances of securing it.
4. Choose the Right Lender
Many lenders, including banks, loan apps, and credit unions, provide short-term loans for businesses. Which of these is the best fit for you? You’re not limited to getting the financing you need from just one of these lenders. In fact, you should only choose by assessing your needs.
Nevertheless, you can opt for a lender that finances businesses in your industry. Given that they understand your enterprise, they might be willing to provide you with a shot and set a convenient repayment schedule.
5. Prepare the Required Documentation
Your lender will require various documents to review and approve your short-term business loan. These may include but aren’t limited to the following:
- Business financial statement
- Business plan
- Business permit and license
- Bank statement
- Income tax returns
- Credit report and history
- Business owner’s identification
Find out the documents your potential lender needs to approve your loan. Then, ensure you have them when applying for the financing.
6. Build a Compelling Case
If you want your potential lender to approve your business loan, you must convince them your business deserves the funds. An effective way to do this is by making a solid case detailing why your company needs the financing.
As you do that, outline your business goals and provide a comprehensive business plan. The document should explain where you intend to put every dime you get. When you apply for a loan, this might persuade the financial institution to lend you the money.
Bottom Line
Following these seven steps can help you secure a short-term business loan sooner than expected. One of the advantages of this type of business financing is that it’s easier to acquire, given that it comes with fewer and more relaxed eligibility requirements.
Furthermore, in most cases, you’ll need to repay your business loan within a year or two, which gives it a shorter time to incur interest. As a result, the interest you pay will be considerably less than that of a long-term loan.
