Purpose of the loan for business
The first step is to determine the purpose of the loan. As part of the approval process, most lenders will want to know what you will use the funds for as there are many reasons for getting a loan for business. It could be to overcome a cash flow shortage, purchase equipment, buy inventory or launch a marketing campaign. Along with other factors, lenders will consider how the money will be used because this will be a factor in your ability to repay the business loan.
When getting a loan for business, there are many finance options available beyond the traditional bank term loan. Common options include a line of credit, business overdraft, credit cards and unsecured business loans. Some loans are fixed term and need to be repaid according to a predetermined schedule. Other loans, such as overdraft facilities, are revolving lines of credit and offer flexibility when making repayments.
Cost of a loan for business
If getting a business loan for marketing, inventory or equipment, you will want to determine what the return on investment will be. This will determine if you will be able to repay the loan as agreed to. Use Moula’s ROI Calculator to determine your return on investment.
Return on investment
If getting a loan for business for marketing, inventory or equipment, you will want to determine what the return on investment will be. This will determine if you will be able to repay the loan as agreed to. Use Moula’s ROI Calculator to determine your return on investment.
Time in business
The amount of time in business will affect your ability to get access to funds. A new business will find it challenging to get a business loan. For some types of bank loans, you might be required to create a business plan that provides details of your new venture. Unsecured online lenders are more flexible in approving loans for new businesses. With Moula, for example, the minimum time in business is six months.
Both your personal and business credit score and history will play a role in getting a business loan. Things such as late payments, defaults and previous credit applications will affect your credit score. Learn more in What Is a Credit Score and How Does It Affect You and Your Business?
Overcome the challenge of accurately comparing business loans
One of the biggest challenges in seeking loans for business has been accurately comparing the options available. This was because lenders did not present loan details in a standardised way. Fortunately, Moula has contributed to the creation of a tool to help small business owners compare loans. Called SMART Box™, it provides standardised metrics that make it possible to compare finance options. Discover how it works in What is SMART Box™ and How Does It Help Small Business Owners?
Learn more about unsecured business loans from Moula. Also checked out Frequently Asked Questions on How to Get a Business Loan.