5 Questions to Ask Before You Apply for Financing
Consider these questions and as you move through the course you will have a better understanding of why each lesson is relevant in your path to financing.
1. How much do I need?
How much you need may be different than how much you want, so be sure to crunch some numbers to figure out much you need to borrow to accomplish specific goals. Also ask yourself what you might do if you are approved for more than you expected— should you take it? If you’re not sure, your accounting professional or a business adviser such as a SCORE mentor can help.
2. How fast do I need it?
Some types of financing, including online lending options, can be obtained in just a few hours or a few days. Others, such as traditional bank loans, including SBA loans, can take a month or more to be approved. Many fall somewhere in between.
3. What are my credit scores?
Some lenders review personal credit scores, business credit scores, or both. In addition, certain negative information that may appear on your credit reports such as bankruptcy (especially open bankruptcies) or business tax liens could affect your ability to secure financing. Simply knowing your scores is an important starting point, but the more important question is, “How do lenders view my credit scores?”
4. How long has my company been in business?
“Time in business” is a common question on loan applications. Some lenders require that your company has been in business for minimum number of years (more than one year is common) before you can qualify. Lenders recognize that younger businesses are higher risk.
5. How much revenue does my business make?
A number of lenders will want to know your annual revenue. Some may drill down deeper and look at average monthly revenue, cash flow, and/or debt-to-income ratios. If your business is seasonal or cyclical, lenders may want to review a longer history of revenue. It’s recommended (and sometimes required) that you have a business bank account so that you can easily gather this information and provide the lender with monthly business bank statements when requested.