For most business owners getting a new business loan can be a drawn-out process, however, getting the money needed for projects and purchases is a good feeling. New business loans allow businesses to continue business as usual, preventing any financial tie-ups. Often times an unsecured business loan is available to anyone with high personal credit. Every business has its own financing needs, before going further it is important to evaluate your business’s loan needs. All money received on the loan must be repaid, it is important to only borrow what the business truly needs.
Common uses for new business loans
- Equipment Purchases
- Property Purchases
- Meet payroll agreements
- Meet vendor payment agreements
- Working capital for the business
What is a new business loan?
A new business loan is a type of loan provided to a business by a bank or another type of lending institution. The borrowing business agrees to repay the money borrowed from the lender with a predetermined interest rate within a predetermined amount of time. On average a new business loan has an interest rate of 2.75% above prime and a loan term of 3 years, depending on the amount of the loan. The interest rate and other terms of the loan are determined by the bank’s credit rating. For those businesses with good credit ratings, they are most likely eligible for unsecured business loans, meaning no collateral or cosigner is needed. Businesses with less than perfect credit ratings are often required to put up some form of collateral such as real estate or equipment, or even use a cosigner to secure the loan; this protects the lender’s investment in the business.
How to get a new business loan
- First, you need to determine what your business loan needs are.
- Second, you need to shop around with lenders to ensure your business is getting the best rates.
- Third, you need to make sure that your business meets the lender’s requirements
- Fourth, you need to submit an application with any business information required
- Fifth, you need to start the negotiation process to get the best terms and conditions on the loan.
- Lastly, you need to sign the contract and set up a repayment schedule that works for your business.
Chris Fuller went to the University of South Florida and has worked in the financial sector for over 20 years. He has extensive experience in all aspects of personal and small business lending, from personal loans, equipment finance to cash flow based solutions for small mom and pop businesses, and large corporations.