6 Things That You Must Watch Out When Applying For Small Business Loan

6 Things That You Must Watch Out When Applying For Small Business Loan

Ideas generally don’t emerge into businesses due to insufficient funds. You not only need funds to start a business, but also need it until the business is self dependent to meet its own expenses. The funding doesn’t come from only one source, it depends on your business model and several similar aspects that help to decide which sources you should consider for funds. The lenders generally require your credit score and credit report in order to come up with an interest rate that you will be paying if you get approved for the business loan. These interest rate may affect your budget if they are higher, therefore I prefer always to go with www.smallbusinessloans.co.uk who always provides less interest rates among all.

In an effort to help you increase your chances to raise funds, I have described six signs that you need to watch out when you’re looking for a source of funds to start your own business.

Scope of Your Business

If you’re ok to share some part of your business, then the angel investors can be a way to go. But, they are not viable for investments under $10,000 or higher than $750,000. And, you must be willing to give up on some control of your website. Last but not the least, you’ll also require to make money from your business by selling it at later stage.


SBA (small business administration) loans are US government backed term-loans which are not available at most commercial lending institutions. The SBA’s first lending program, 7(a) loan program promises up to 85% of loans up to $150,000 and 75% of loans of higher than $150,000 and, the maximum loan amount is $5 million.

But, the dark side of this is, it needs to be prepared for time-consuming paperwork. So, unless you’ve large amount of time at your disposal, this may not be an option for you.

Quality and Credibility of Your Business Plan

You have to keep in mind that these type of financing are speculative. As a result you require to lay down your propositions in front of the lender. So, if you’ve well-detailed, accurate, structured and professional business plan, you might wanna start at looking for an alternative mode of financing.

Long-term Viability

If your business has a long-term viability and is professionally arranged financial statements along with robust reporting systems, customers with a good payment history and commonly sold inventory, you can go with asset-based business loan.

Asset-based loans are based on assets, usually account receivable as well as inventory, which are used as collateral. These lenders will generally advance funds based on a pre-decided percentage of the secured asset’s value.

The long-term viability of your business is also essential because an asset-based loan will cost more than the traditional loans. The interest rates vary from banks to banks. And, your business must be able to offer for such an extra cost.

Final Thoughts

If you’ve strong personal network, your family and friends can be a source of funding if there is no risk for ruining relationships that you have with them. Such investment can be a great form of an equity investment or loan in the business. Partnering with this type of investor can also prove to be beneficial in many cases.