To start a small business you will need capital, but when you have exhausted your savings and the money of investors, a small business term loan may be your best option to obtain necessary funds. Before you start to apply, however, you should …
Introduction
To start a small business you will need capital, but when you have exhausted your savings and the money of investors, a small business term loan may be your best option to obtain necessary funds. Before you start to apply, however, you should know what a small business term loan is and what you need to do to get one.
Instructions
Difficulty: Moderately Challenging
Understand What a Term Loan Is
Steps
1
Step One
Know that term loans provide you with a lump sum of money to finance or buy supplies for your small business.
2
Step Two
Realize that most small business term loans are approved for a period that varies from a few months to several years, with a fixed interest rate and set repayment schedule.
3
Step Three
Understand that you will need to pay back the entire loan balance amount at the end of the agreed term.
Find Out Where to Get a Term Loan
Steps
1
Step One
Ask other small business owners where they obtained term loans. Word of mouth is an effective way to find a trustworthy source of funds.
2
Step Two
Use the bank with whom you currently do business. Using a well-established relationship can sometimes be an advantage.
3
Step Three
Visit multiple banks and meet with loan officers who specialize in small business loans to compare loan terms and interest rates.
Know How to Get Approved for a Term Loan to Finance Your Small Business
Steps
1
Step One
Create and write up a business plan. Have a solid idea of what your business will do and demonstrate you have done everything in your power to make sure your business will succeed.
2
Step Two
Only apply for what you need. Show that you already know how the loan money will be spent and try to avoid using the money for anything that will incur more debt.
Overall Tips & Warnings
* Know that the loan application process is complex and time consuming, and involves supplying a bank with tax returns, a business plan, a credit report and any papers that refer to your business finances.
* Plan to spend several business days researching loan providers and securing your term loan. There may also be a short waiting period as your lending company determines how much money it’s willing to give you.
* Realize that you will need to pay back the whole loan amount in a relatively short amount of time and the bank can foreclose on your business if you are not able to do so. If you’re concerned about your ability to pay back the entire amount, think twice before securing a term loan to avoid a costly legal entanglement with the loan provider.
Resources
* Although the Small Business Administration does not supply loans itself, it can direct you to those institutions that do. Visit its Web site at SBA.
