FROM THE SUCCESS PEOPLETM
Quiz: What Small Business Loan Is Right For You?
You probably got a loan, large or small, to start your business and you’re likely to be paying it back for quite some time. Your business won’t take a smooth trajectory from small business loan, to paying it off to rolling in profits: you might need another business loan or line of credit to see you through difficult economic conditions, purchase new capital equipment or expand your operations. As a full-service accountancy firm we don’t just complete tax returns and bookkeeping services in Bonnyville, but help local businesses in every aspect of becoming and staying successful, up to and including securing loans.
What are your options if you need another small business loans?
How Fast Do You Need Cash?
If a major piece of equipment breaks or you find yourself suddenly short of cash during a difficult period then speed may outweigh the size of loan and payment terms. A Merchant Cash Advance gives you a lump-sum payment in exchange for a percentage of your future sales- typically around five percent. Many payment processors offer this service, as do banks and credit unions.
How Can You Pay It Back?
Merchant cash advances are easy to pay back providing that you can absorb an extra five to ten percent in your overheads, but if you need a larger loan or different payment options then you need to consider how you will be paying back the loan. A neighbourhood coffee shop would be fine with a merchant loan: a five percent slice of the profits of a single cup of coffee is not much when you consider that they’re sold at an 80% markup. A construction company that has single large payments at irregular intervals might not be able to make weekly payments but should have an easier time with monthly payments.
How Is Your Credit Score?
No matter what kind of loan you’re getting, you’re going to need a credit score that is at least relatively healthy. Some companies may be willing to look at financial information that shows that your company is in good shape: they know that companies might have to damage their credit score by delaying paying off loans in the early stages of their business, but that their situation can improve before their credit score catches up. We can prepare these documents for you and recommend potential sources of funding.
Do You Have Collateral?
Larger loans might require collateral, and not all businesses will be able to produce it. If you rent your office and have little in the way of capital equipment then you may not be able to satisfy a lender’s requirement for collateral. Some lenders may be willing to let you use your own house or car as collateral. You may also want to consider ‘paper collateral’, otherwise known as invoice factoring: basically, selling your unpaid invoices to a factoring company at a discount to get the capital now rather than later.
Can You Get The Application Done Quickly?
Once you start down the path of getting a loan, it’s important to get the application done quickly. Lenders are human beings, and if they have to re-underwrite the loan several times they may be less inclined to lend to you, at least at the terms that you want. As with financial documents, accountants in Cold Lake Alberta KAFT CPA can help with applications, getting them done quicker and thereby avoiding having your loan refused or amended.
When Will The Loan Pay Off?
Not all investments pay off right away, and some don’t pay off at all. Some lenders may be able to offer a grace period in which you won’t have to pay the loan or just pay the interest, which will help you to get to the point where your investment is starting to produce results. If there is any doubt about whether you will be able to pay off the loan then you need to have a serious discussion about whether you should get the loan in the first place: defaulting on your loan will ruin your credit rating, making getting additional loans more difficult and expensive, putting your business on the track to failure.
How Much Do I Really Need?
Large loans won’t just take longer to pay off, they come with a whole host of bureaucratic hurdles to clear before you’ll get the money. You’ll have to produce financials, potentially from the start of the business onwards. Our own Assurance service is designed to help companies to produce any kind of financial information a lender (or the CRA, when completing a tax return) might require.
Loans are a gamble for even the best companies, and the pitfalls are huge- potentially including bankruptcy. If you need a loan, talk to us first- you won’t regret it.
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