Consider these key questions before applying for a small business loan
Are you considering taking out a loan for your small business? Financing your business is a serious undertaking, and it’s important to make well-informed decisions about your need for capital at the onset. Below, we’ll review some key steps to take and questions to ask when seeking funding.
A crucial first step is to critically evaluate your business’ financial situation. By truly taking the time to assess your business’ financial health, you’ll have a better understanding of the whole picture and ultimately identify the funding that would work best for your business.
Also, be sure to revisit your business plan. If you don’t have one, that’s a good place to start! We highly recommend you check in with a business counselor or coach. Business coaches bring a level of expertise to the table when evaluating your particular situation, and can provide questions you may not be thinking about but should be. They may even help you to identify that what you need is time or proper cash flow management, instead of a business loan.
Very often, these community services are available to you for free and may even have lender relationships to connect you to the right financing match. It’s a great place to ask yourself how this funding fits into your long term and short term business objectives.
A few terms you should be familiar with when discussing the loan process are debt financing and equity financing.
- Debt financing is money you pay back, usually with interest, over a set time period with specific terms, like a bank loan or credit card.
- Equity financing involves giving up a portion of the ownership of business in exchange for money from equity investors; equity investors become part owner of the company. Some examples would be angel investors or venture capitalists.
We want you to reach out to local resources and start asking questions. We have partners in your area, so be sure to visit our online resource portal for more information.
This work is supported by the Sam's Club Giving Program.