What Does It Really Take to Get a Small-Business Loan?

It’s no secret that creating and evolving own business requires considerable financing. Though, entrepreneurs not always have a sufficient amount of funds. The solution can always be found. A loan for small-scale enterprises can be obtained. 

How to Get a Small Business Loan

Acquiring a loan for business buildup is not easy. It is quite possible to understand lenders. Banks are not charitable organizations, so it is essential for them to be sure that the money will be returned on time. Often, created business projects are unprofitable. If this happens, there will be no one to return the debts. 

The easiest way to get a loan is to run a business for a long time. Banks that provide loans for small-scale enterprises often take certain measures to reduce their risks:

  • The requirement of supplementary security in the form of a pledge;
  • Registration of the insurance policy;
  • Credit rate increase;
  • An accurate business strategy if you want to start a new enterprise;
  • Loan programs with a large number of restrictions and strict terms.

If the business exists for several years, it will be easier to get money. If a businessman doesn’t have a small amount to start a company, it is often easier and more profitable to apply for a non-targeted consumer loan. In this case, you will have to prove your solvency as an individual. 

If you wish to arrange a loan for a business, a credit institution will ask you to specify the purpose of receiving funds. Most often, the following business objectives are the goal of a loan:

  • Increasing working capital;
  • Purchase of additional or improved equipment;
  • Acquisition of patents and licenses.

Banks prefer to arrange loans exclusively for financially promising tasks. The loan repayment period is determined individually depending on the tasks to be solved using the money received:

  • If the purpose of obtaining a loan is to increase working capital, the repayment period usually does not exceed one year;
  • If a loan is issued for the purchase of equipment, usually 3 to 5 years will be given for the payment of a loan.

Business beginners should be prepared that they may need to provide a pledge to prove their solvency. High-value property is usually used as a guarantee. 

Businessmen not always manage to select a suitable loan program and cope with all the requirements of the bank independently. If such a situation exists, it makes sense to contact credit brokers. These companies help in obtaining loans. But you should be as careful as possible and do not transfer funds before the loan is issued. There are many scammers among the brokers.

Loan Rates 

For targeted loans intended for the implementation of certain business objectives, the rate in most cases is lower by about 1.5-3%. On average, the market rate is about 15%. The size of the traditional business loan is determined by the objectives of the borrower, as well as the chosen program the range of which can be vast.

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