Did you know that small businesses provide 55% of all jobs in the U.S.? Small businesses, in many ways, are an incredibly important part of the U.S. economy. At some point in the cycle of all small businesses, a loan will probably be necessary. Why?
For a small business to grow, it often needs to invest substantially in its operations. For some small businesses, that might mean buying a larger warehouse so that the cost of order fulfillment can be driven down, and shipping times can be reduced. For other companies, buying better equipment may be expensive in the short run, but increase production time and quality uniformity substantially in the long run.
When it comes time to take out a small business loan, there will be a lot of options at your disposal. However, with a lot of choices comes a lot of potential mistakes. Here?s a few things you should avoid doing when it comes to small business loans.
1. Don?t Max Out Your Cards
Some small businesses decide that a loan is too difficult and go the route of maxing out credit cards instead. This is a mistake. Not only will you have to deal with high interest, but you?ll also potentially damage your business credit score if you end up having any payment issues. This can make it a lot harder to get a real loan going forward — even if you badly need it.
2. Don?t Go In With No Plan
There are multiple reasons you should have a clear plan for what you?re going to do with the money you receive. For one, if you want lenders to trust you, you?re going to need to show them you know what you?re doing and that there is a clear path forward. Coming to a prospective lender with nothing more than question marks isn?t going to get you on the fast road to alone. For two, you?ll use the money more effectively if you know exactly what you?re going to pay for, how much it?s going to cost, etc. Otherwise it may be tempting to invest in things that would be nice, but aren?t really what your business needs to move forward right now.
3. Don?t Jump the Gun on Signing: Contact Funding Experts
As All Business points out, it?s easy to jump the gun on signing the papers for your loan because you really want to move forward as quickly as possible. However, it?s important to know the details of what you?re signing and read through everything carefully. You don?t want to find out a year later that you?re not locked into your interest rate — only to watch it jump and double. In many cases, it’s a wise idea to make an appointment with funding experts familiar with working capital loans like yours, before signing on the dotted line and making things permanent.
Do you plan on establishing a clear business plan for the future, contacting funding experts, and keeping your credit cards in your pocket? Let us know.