One of the best ways to get funds to finance the expansion of your small business is by taking a loan. In this article, we will be looking at the specific steps you need to follow, once you have made the decision to fund your small business’ growth through a loan.
In that regard, you need to (among other things):
Figure out how much money you need to borrow
The starting point here is to think deeply on how exactly you are planning to expand your small business. Is it, for instance, a scenario where you are planning to expand the business’ inventory? Or is it a scenario where you are planning to establish a new branch of the business? Could it be a scenario where you need to buy new/better equipment for your small business? … Whatever it is, you need to start with a very clear picture of the expansion you need to undertake. Then once you have identified the type of expansion you wish to undertake, the next step would be to find out how much money exactly you would need to actualize it. This should not be a matter of making wild estimations or guesswork. On the contrary, you would need to undertake real research, to find out what the various things you need for your business’ expansion cost. Once you find out how much the expansion is really likely to cost you, you then need to ask yourself how much of that money you have at hand. The difference between how much money you need for your business’ expansion and how much money you have at hand is what you would need to borrow.
Identify the financial institutions you can borrow from
Not all financial institutions are willing to give loans to upcoming small businesses. You may, on the other hand, find a financial institution that [on principle] is willing to give you a loan, but which simply can’t give you the specific amount you need. Or you may find another financial institution that is willing to give you the amount of money you need to expand your business, but only if you give very valuable collateral. You could get yet another financial institution that is willing to give you the amount of money you need to expand your business, without demanding for a great deal of collateral, but with a very hefty interest rate… But what you need to do at this stage is simply identify the financial institutions that you can work with in this regard. They could include banks, credit unions and the government agencies that are tasked with promoting small business growth.
Select the specific lender to apply for a loan from
After getting a list of the various financial institutions from which you can potentially borrow money to grow your business, the next step is to select the specific one(s) to apply for a loan at. You need to be objective here, and ensure that you have very solid reasons for settling on the financial institution(s) you ultimately settle for. So, for instance, you could ultimately settle for lender X or Y because of some four reasons. That would be where they are willing to give you the full amount of you need for your business’ expansion, at a reasonably low interest rate, with a good grace period and with reasonable collateral requirements (or none). Just ensure that the lender you ultimately settle on is the one who gives you the best possible deal.
Fill in the small business loan application forms
After selecting the specific lender to take a small business expansion loan from, what next? The next step would be that of requesting for the loan application forms. Nowadays, some lenders have web-based platforms which enable people who are looking for business loans to apply online. Others are still doing it the old way, through paper/printed forms. Whether you do it online or in the traditional way (using paper/printed forms), the most important thing is to ensure that the information filled in is both accurate and truthful.
Read the small business loan terms and conditions carefully
Almost all business loan application packages come with ‘Terms and Conditions’ sections. It is easy to be tempted to skip reading these, as they tend to be written in complex legalese and usually in rather small fonts. Yet it is important for you to at least make an effort to peruse through the said business loan application fine print. It is only by reading the terms and conditions that you get to know what you are really getting yourself into through the business loan.
Submit your small business loan application form
If you are using an online application platform for the small business expansion loan, submitting the application may just be a matter of clicking on a button. On the other hand, if you are using a paper-based/printed application form package, submitting may be a matter of sending it by post. Or taking it in person to the lenders’ offices… The most important thing, before submitting the business loan application form, is to ensure that all the required bits of information have been filled in accurately and in a truthful manner.
Await for the credit decision to be made
The period of time you need to await before you can know whether your small business expansion loan application has been successful will vary from lender to lender. There are lenders who will make a quick assessment and tell you whether your business loan application was approved within the same day. And there are others with whom the business loan application assessment can take as much as a month, before giving a credit decision. Yours, at this stage, is to just wait patiently.
Deploy the loan funds efficiently
Once the small business expansion loan application is approved (and the funds deposited into your account), you need to ensure that you use them efficiently. You need to ensure that the money is only used for the purpose it was borrowed for – namely business expansion, and nothing else. Admittedly and understandably, the temptation to divert the funds to other uses may be strong. You need to remain focused though, and ensure that the funds are strictly only used to finance the business growth they were intended for. The extra income you stand to earn once your expanded business starts bringing in the anticipated higher profits can be used to cater for those other personal issues. Just see to it that the funds borrowed for business expansion are strictly spent on that purpose.