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Before closing any business related to loans, consider the different types of credit and financing so that you know which one is best for you or your company.
There are several types of loans for micro, small and medium businesses, including bank loans, commercial loans, lines of credit, angel investors and risk investors, loans from friends and family, loans between peers and crowdfunding.
Commercial bank loans generally offer a well-structured solution and often apply low interest rates and flexible repayment terms. Many banks, financial and credit unions offers for almost every type of company the majority of bank loans.
For companies that are with good score, unrestricted credit history and good to excellent scores, chances are increased to get loan approval for both entrepreneurs in personal credit as well as commercial credit.
Asking for a friend or family loan may seem like a tempting option, but it also poses risks to your name and CPF. If you do not want to destroy your personal relationship because of access to money borrowed from a relative, then you can not take this path, if you do, put everything down in writing, file with the notary, and often communicate with the lender so that he knows you’re alive.
Likewise, angel investors, they may seem like a savior to your business, but you need to commit part of your business to get financing from them. The angel investor in general wants a shareholding stake in your company and may request other advantages because of the association with your company.
The best loan for business are the ones that are fast and provide the working capital needed for you that has low interest rates, fixed repayment terms and favorable terms and conditions. Oak Park is super fast.
Duration of the loan to small and micro-enterprises
Some small business loans are financed with short term, and used for the payment of costs, expenses and unexpected debts, while others longer, can be used for expenses like real estate acquisitions, machinery and structural expansion.
Short-term commercial loans generally last for 6 – 12 months. With this deadline you can pay off the balance more quickly, and usually you pay less interest on that transaction. This is the least expensive choice. However, it depends on the amount you need to borrow.
A long term loan can last 10 years or more. This type of loan is usually intended for long-term investments that will continue to benefit the company at least until the loan is repaid.
If you decide to expand the business to another city, for example, a long-term loan, it can serve to acquire a new room or building – does that make sense?
Small Business Loan Interest Rate
Are you going to ask for credit for your company? So be sure to check the interest rates on the loan with different financial institutions to find out if the fees pay off or not.
According to experts in the PJ credit market, small loans tend to cost more expensive because of interest than large long-term loans.
In general, conventional bank loans and commercial lines of credit offer better interest rates than the other “less bureaucratic” options. If you can qualify without problems, just choose the type of loan and apply for.
What are the requirements of the small business loan?
Every financial institution and lender can impose their own requirements, credit policies and loan approval in addition to the terms and conditions for repayments. Knowing about these rules can help you make the right decision.
For example, some banks lend money to companies that have been CNPJ without restriction and have more than one year of operation. Others require applicants to have a certain credit score or to request collateral for the loan.
However, others offer loans to negative companies , do not consult with creditors, and care little about credit history because they have differentiated and alternative appraisal criteria. Meet the Peer-to-Peer Lending P2P.
Want to make a loan for your small business?
It is worth emphasizing that applying for a commercial loan or working capital for your small business, using the resources in the right way, surely you and your team will leverage the business how it should be done to achieve success.
If you need a business loan solution or keep cash flow positive, search here on the site that you will certainly be able to find many articles and excellent credit options and financing modalities.
What do you need a commercial loan for?
The first step of any loan search for your business dealing with some business is to determine what you really need from a financing.
From commercial bank loans, to stock financing, to cash advances to companies and merchants .. There are many different types of loans targeted exclusively to small businesses of the most diverse segments.
Each loan serves a different set of business goals.
Do you need working capital to fund regular business expenses? A traditional credit line may make more sense. Need to fund your late bills? You will always find a perfect loan for your business.
A commercial loan generally serves for:
- Start your own business
- Quickly take on a new entrepreneurial opportunity
- Expand your business locally or globally
- Maintain an extra reserve of cash to adjust cash flow
- Manage your daily expenses and payroll
- Financing raw materials, equipment or stock purchases
- And much more
Identify why you need cash capital and filter your search for “small business loan” if you find a satisfactory one, set your funding goals.
How much can you actually afford?
Once you determine why you need the commercial loan, the next step is to think about how much financing you need – and most importantly, how much loan for your companies you can actually afford.
One of the first questions that lenders will ask you when you begin your search for “small business loan” is – how much are you looking for?
Yes, we would all like $ 1 million deal. But instead of thinking about how much you want or need, think of the lines of credit that you can afford without going through hassles.
How long have you been in business?
Another crucial factor in your qualification for a small business loan is the amount of time you were operating the business.
Why does it matter so much?
When it comes to this, starting a business can be risky. Not all companies will go through the first year.
And for that reason, lenders may hesitate to want to approve credit for novice entrepreneur who may not have their doors open next year to make their payments up to date – sad reality in Brazil.
For financial institutions, leading to a small business that has an existing business for 2 or more years may be a venture less risky for them.
This is not to say that you will not have options if it is a new company. Companies from 6 months to 1 year have many options with online lenders.
Business owners with at least two years of experience will have even more options available with online lenders, and may even qualify for a bank loan with great interest rates.
If your company is less than 6 months old, check out personal credit options before putting your company on the line.
How much money is coming into your company with your business?
Lenders will also pay attention to your annual income when determining that you qualify.
Anyway, analyzing how much money is coming into your business, will help the lender in determining what loan amount for your small business will be approved and released.
No lender or serious institution would grant a business loan with monthly payments that exceed the amount received as revenue each month.
In most known cases, a lender will at the very least qualify you for a small percentage of your monthly or annual income to make sure that your company will always have the cash in hand to make the payments month by month.
Getting a small business loan is always a major obstacle for its owners, mainly due to the rules and rigid standards of banks.
However, it is often imperative for an entrepreneur to obtain external financing to start or expand their business, cover day-to-day expenses, or have money to make payroll payroll and keep stock.
Obtain approval for small business loans
Although researching, finding, soliciting and getting approval for a small business loan can be difficult, the more prepared you are, the better.
Here’s how to get yours in five steps :
- Point out why you need the money. Ask yourself how this loan will help your business
- Find the right loan. Choose a type of loan based on your needs
- Find the best lender for your company. Compare options based on cost and interest for each type of loan
- See if you have what it takes to get approved. Gather information, including your credit score and monthly and annual income
- Prepare the documents and make the request. Find out what documents your creditors will need before you start the order
Decide what type of loan is right for you
Your reasons for needing the loan will dictate the type of small business loan that you will receive. If you are starting a small business, it is practically impossible to get a loan in the first year of your company.
– Lenders require cash flow to support the repayment of the loan, so that micro, small and startups are usually immediately disqualified for the commercial loan.
Instead, you’ll have to rely on personal and company credit cards if you have personal loans with friends and family, crowdfunding financing, peer-to-peer loans, or microcredit lenders or government lenders.
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