Business Loan

Tips to Easily Get Loan for Your Business

There are many reasons why you would need a loan for your business – startup funds, loan to expand and diversify into new areas or simply to replenish cash flow and ensure adequate working capital. However, raising a loan is easier said than done. You have to prove your repayment abilities to the lenders, provide collateral as security and even prove that your business has the capacity to take on additional debt. All this can be a long drawn affair and borrowings where you have to meet all these stipulations might not be useful if you need funds to meet urgent operational requirements.

To get you around such tight situations, here are a few tips to enable you to easily get loan for your business.

Use your credit card

This is the route that you should take if you need funds quickly. A credit card is like a pre-approved business loan but there are some serious pitfalls that you have to consider. If you fall behind in your payments, there will be an adverse effect on your credit score which in turn will negatively impact your ability to raise further funds through other means. If you pay just the minimum each month, the accrued principal and interest burden can overwhelm you. However, use a credit card responsibly to meet short term and urgent needs only and there should not be any problems. For example, if you are in the business of solid plastering in Melbourne or anywhere else for that matter and need funds quickly to buy raw materials, opt for this method

Get a microloan

This is for small businesses with credit requirements in the range of $500 to $35,000. Generally, banks and large financial institutions will not lend these small amounts and even if they do, the paperwork will get you down. Micro lenders on the other hand require minimum documentation and have flexible underwriting norms. These lenders are usually non-profit organisations that charge slightly higher interest than banks but ensure hassle free funding. It is ideal for a start-up entrepreneur or small businesses facing a capital gap for buying new machinery or meeting working capital requirements.

Factoring

Most businesses face a cash flow crunch because of high receivables. Factoring is a method that helps you sell your receivables at a discount and get instant cash up front. Hence you get cash against invoices long before they become due for payment. However, the cost of factoring can be pretty high. If you pay a discount of 2% to a factoring company to cash in invoices 30 days in advance, it is an effective rate of 24% per annum. These lenders bid on invoices one at a time or in bundles.

These are some tips to quickly get loan for your business.