Is Your Business Ready for a Small Business Loan in NYC?

If you’re not sure whether your business is ready to take on a business loan, here are three tips that can help you decide.

1. Your credit score has improved significantly.

Having a good personal credit score is one of the factors potential lenders take into consideration when it comes to loan applications. If your personal credit score has improved significantly in the past few years, then you might qualify for a business loan with better rates and terms.

Every time your credit score changes, it’s worth checking whether you are eligible for a loan or not. If your personal credit score reaches 700 or more, there’s a huge possibility that you might be able to refinance your business loan with competitive terms and interest rates.

2. You’ve spent two or more years in your business

It’s worth noting that as part of the application process, a potential lender wants to be able to predict whether your business is in it for the long haul. They also want to know how you will manage cash flow. Lenders eligibility usually overlook young businesses when it comes to small business loan eligibility, making it especially difficult for start-up companies to qualify for a  loan.

When your business reaches its two-year anniversary or more, this can significantly affect your eligibility for a loan. If you were funded with a high-interest startup loan, a two-year milestone may be a good time to refinance your loan.

3. The off-season is right around the corner

The best time to apply for a small business loan is when you don’t need one. In fact, it’s better for seasonal businesses to apply for loans during their busier seasons. While it’s hard to see past your current success, it’s important to think of the future – particularly an off-season. You can prepare for the upcoming off-season by applying for a small business loan beforehand.

Small business loans help you bridge cash flow gaps during slower seasons in your operation. Don’t wait to apply for a business loan when your expenses are high and your cash reserves are low. As a matter of fact, lenders favor a business that just experienced a profitable period.

While the loan requirements vary from lender to lender, a common requirement between all lenders is, they ask for cash flow and expense forecast statements. These documents help them understand your business. Even if your business is experiencing a profitable season, it’s best to gather the documents needed and apply for a small business loan when your business is booming.

4. You can’t handle all the demand.

Business expansions are more than just increasing your office space or branching out to other locations. If you receive too many orders and you don’t have enough inventory or staff members, it might be time to apply for financing. Term loans or business lines of credit can fund these expansions.

If you need additional equipment to keep up with demand, applying for equipment financing makes sense. You’ll receive the funds you need to purchase or lease equipment. It also has speedy approval processes and the equipment you use serves as collateral for the loan.

The terms of the loan depend on the value and the expected life of the equipment. If you need more than just a piece of equipment, you can look for other loan options as well. Keep in mind that lenders are more inclined to lend to businesses that just came off a profitable period.

5. You already have a business model and plan.

Most lenders require applicants to submit a business plan. They want to know that your business idea is practical, operable, and worth funding.

Your business model shows your revenue stream while your business plan lays out how you’re going to achieve those revenue streams. A business plan typically includes an executive summary, description of your business, marketing strategies, operations plan, description of products and services, competitive analysis, financial plan, management team, and forecasts.