5 Things To Keep In Mind When Applying For Short Term Business Loans

When you are looking for a business loan for a start-up business, it can be difficult to know where to turn. The options on the market are many and it can be both time consuming and frustrating to try to probe it. However, you can simplify for yourself by taking things in the right order. Read about 5 things to keep in mind when starting small business loans. 

1. Determine The Needs Of The Start-Up Company

Before you even go out in search of a cheap business loan, it is important to determine the need. You should be aware of exactly how much money the new company needs to borrow and in what ways these should be used. Only when you have access to this information can you determine how large a loan your start-up company needs.

2. Choose The Correct Repayment Period

Regardless of whether you intend to take out a short-term or long-term business loan, the repayment period is an important factor. The number of months the loan runs should be neither too many nor too few. You can compare lenders with a repayment period of between one month and five years. You should choose the term that best suits your new business.

When choosing a payback period, it is worth considering your unique business model. For example, if new business will be seasonal, it may be worth trying to pay off the loan during the high season. In this way, you can free up the budget space occupied by the borrowing cost in time for the turnover in the newly started company to start to decline again.

If the start-up company instead has a steady turnover throughout the year, you have the opportunity to reduce the monthly cost of the loan by extending the term. This can contribute to increased liquidity in comparison with if a shorter maturity is chosen.

3. Compare The Total Cost

In addition to having to choose between long-term or short term business loans, interest costs are also important to take into account especially when you’re applying for an sba loan application online.  It may be worthwhile to compare the interest rate offered by different lenders, but it is important not to stare blindly at this. Although more short term business loans may have a higher percentage annual interest rate, you can in fact save money by taking out such a loan for start-ups. This is because you pay for the loan over a shorter period of time compared to a loan with a longer term.

4. Budget For The Loan

You can facilitate the repayment of the business loan for your new business by taking a few simple steps. You take these as soon as possible after the loan application has been approved and then maintain them during the loan period itself. The measures we are referring to are as follows:

  • Budget in advance. As soon as you know exactly what the repayment schedule for the corporate loan looks like, you should budget for the various repayments of the loan. You can then feel confident in the knowledge that the installments are budgeted for and that you know in advance how these will affect the company’s finances.
  • Set aside money to repay the loan. Feel free to create a special buffer that is earmarked for repayment of the corporate loan. The buffer should correspond to at least a monthly installment. The repayment of your small business loans can then take place according to the installment plan, even if the company should suffer unforeseen expenses or declining income.

5. Let It Take Its Time

For start-ups without any historical results, it can be more difficult to be granted a business loan. Lenders then have no basis on which to base their valuation. For corporate loans to start-up companies, it is then even more important to include more information in the application. 

When you are considering applying for a business loan for a new business, you are faced with several important choices and should not rush into a decision. Unless the need for financing is very urgent, you can sleep on the matter and let the choice of lender gradually grow!