While Google, Apple, Tesla, and Facebook get all the media attention, the US economy is actually more reliant on small business. Small businesses make up 99.7% of all US businesses. Of the companies that export US goods abroad, 98% of them are small companies. But for many of them, to operate effectively or to grow they need small business loans.
If you’re running a small business, here are the facts of life you need to accept in regards to small business loans.
- You’re going to need a loan when you start. Don’t go into business thinking that you’re not going to need a loan to start or grow your small business. Just because you have your savings ready doesn’t mean it’s going to be enough. Most of the time, you’re projected expenses are going to be way off, and you may not get the revenues you were counting on.
A loan can be a great way to help you out with the business so you have more breathing room in which to operate. It can provide you with the equipment and personnel you really need. You can also boost your advertising and your online efforts as well. Starting a business is like any construction process—you’re going to need more money than you anticipated.
- You’ll need a loan for growth. Growth can mean many things. It can mean selling more goods to other markets. It can mean expanding your offered goods that appeal to your current customer base. It can mean additional services and locations.
But to be able to do that, you’ll need more capital. Moreover, you can’t simply wait for the gross revenue to come in to help fund your new hires and equipment expenses. When you need the money right away, then a loan is your best option.
- You can’t be sure that you’ll get the loan you want. Banks are, by nature, very conservative. That’s why there’s a very popular saying that goes: banks are only happy to lend you money when you don’t really need the money. So be prepared for a rejection, and have a backup plan when you don’t get approved for a loan.
For big banks, small business loan approval rates are not exactly encouraging. In July of 2016, the rate was 23.1%. And that was down from the June figures.
If you don’t have a bank willing to lend you the money, try a merchant lender. Merchant lenders are less conservative, so their approval rates are higher. Some, like the Merchant Lenders of Canada, have an approval rate of 95%. So unless your business is really floundering, you can rest assured you’re going to get your loan.
- Sometimes speed is the issue. Banks loans can take quite a while to process and this can be a problem when you need capital for your everyday business expenses. If this is the case, you may want to consider merchant lenders who can offer you a loan with shorter processing times.
Small business loans are crucial for any small business. Make sure you already have a dependable source of financing when the time comes that you’ll need one.