Why, how and where to get a small business loan are easy questions to answer. Figuring out when to get a loan is a more complex issue. The answer to that question depends on what you want to do with the funds, the type of loan you are interested in applying for, along with both your current and past business and personal financial history.
The national and global economic cycle matters too. Overall, small business owners are optimistic about the economy. But it’s important to prepare for unexpected issues, like health crises and political upheavals, that rapidly impact all businesses. Best bet is to have enough working capital available to leverage opportunities and survive the challenges.
Funding to start a business
You’ve got a great idea for a business; you’ve done your research and you know there’s a need for your services or goods (and the market isn’t oversaturated with other businesses filling that need). You’ve created a business plan, and you’re ready to go – but you need funding.
If you have an excellent credit history, you can apply for a loan through your bank or credit union or an SBA loan. If you haven’t opened your business yet or have been in business less than 6 months and your personal credit history isn’t excellent, you will have an easier time getting funding from alternative sources, which tend to be more focused on the future profit potentials of your business as opposed to your past credit history. Once approved – you often can access the funding faster – in days rather than the month or more that it takes to access funds from a traditional bank loan.
To take advantage of a new business opportunity
The right time to financially prepare for a sudden opportunity is now. Think about establishing a business credit line that you can draw from when needed. But, if like many small business owners, you don’t qualify for a credit line that would enable you to do much of anything, you still have options. Look into alternative funding sources, which typically have a streamlined qualification process – you can have the money in your account within 72 business hours. And once you’ve found a funding partner that you like working with, it’s a good idea to establish a business relationship with them. That makes it easier for you to return for additional funding when the next opportunities present themselves.
To increase working capital
Small business owners don’t always pay enough attention to working capital. But low working capital is like living paycheck to paycheck. It’s stressful, it limits your options and it can eventually result in a financial disaster that puts you out of business. Working capital is a safety cushion that helps to ensure you can keep your business up and running even if you hit a slow period or have a small disaster that requires time to recover from.