In a competitive business world, starting or expanding a business is risky yet rewarding if done correctly. When it comes to financing a new commercial property, lenders will consider many factors, such as your financial strength, the size of the loan, the length of term you desire, and the financial condition of your company. With strict criteria and a national credit crisis, it can be difficult to obtain a loan from your bank. Here are some options for small business owners who need to borrow money to finance a new building.
1. Get an SBA loan
Loans guaranteed by the U.S. Small Business Association have become a hot commodity, as banks are reluctant to take chances with their own money in times of credit crisis. SBA-backed loans are open to any small business; however, there are certain criteria:
• The SBA cannot guarantee loans to businesses that can obtain the money they need on their own, meaning you must first be denied a loan from your own bank before you can apply for an SBA loan.
• You must meet the government’s definition of a small business within your industry.
• Depending on the type of loan, your business may need to meet other criteria.
• After your business has met all the qualifications, you must apply for a commercial loan from a financial company that provides SBA loans. The SBA does not process loans directly.
2. Get a microloan
Despite a lack of credit history and inability to obtain a bank loan, you will still be able to borrow money from a microlender. Microloans are small business loans ranging from $500 to $35,000. Microlenders offer small loan sizes, require less documentation, and have more flexible criteria. However, they do offer slightly higher interest rates than banks. Microloans are great for both startup entrepreneurs and entrepreneurs in an existing business who need to secure capital for new equipment or new establishments.
3. Keep track of your expenses from the start and keep them low
While income grabs everyone’s initial attention, it is important to keep track of your expenses from the start. When securing a loan, your expense liabilities will need to be shared. There are various free or minimal cost business software options that allow you to keep track of your expenses and necessary information. You should also save or take photos of all receipts and invoices. It is easier to keep track of your expenses along the way, rather than letting it build up over extended periods of time. For larger expenses such as rent, payrolls, taxes, interest, cost materials, debts, and utilities, it is crucial to plan in advance. It is also important to keep your initial expenses as low as possible. You do not need the most elaborate materials for your new office. With growth and success, these perks can be acquired.
4. Do not forget about hidden costs
There are many hidden costs that come with running a business such as insurance, taxes, permits and licenses, and legal fees. And of course, there’s always an additional expense at every corner. Make sure to factor these costs and unexpected expenses into your budget and be prepared for mishaps and emergencies.