Small business borrowing: Money now- hurry
We want to clear most of your doubts about business loans, that’s why we have made a recount of the main questions that you ask us so that you have a simple guide on business loans- clicking here.
1. What is a business loan?
A “business loan” or commercial loan, is a loan of money granted to grow, strengthen, improve or start a business. The main objective of this type of loans is to generate more money, that is, to obtain resources not only for the return of money but for the growth of the business owner.
2. What is the difference between a personal loan and a commercial or business loan?
In any type of personal loan, the risk rating is based on personal income and your credit profile, while the commercial loan is based on the income of your business and its capacity to generate more income with the injection of capital you will receive (money to make more money)
3. Do I need to have my business structured legally to access a commercial loan?
Yes. An essential requirement in business loans is that personal income and expense accounts are separated from business accounts. Remember that you must show that your business has or will have sufficient payment capacity to be able to return the commercial loan.
4. If I have my business structured legally, does my personal credit no longer matter?
Unless your business has already built commercial credit your personal credit will always be important for the qualification of a business loan. Remember that a loan is associated with risk and risk is associated with confidence. Being the owner of your business, your credit profile and your behavior handling credit will be important for the lenders when evaluating whether or not to give you a commercial loan.
5. Is there only one type of business loan?
No. It is essential that you know it because, in our Hispanic community, the lack of information regarding this issue has cut off many possibilities for growth for our small businesses.
In the market, there are many types of financial products for businesses and different types of lenders that generate financing in each financial product. Any of these products can be adjusted to your needs according to the industry you move, the type of customers you have, the accounts receivable you have, the growth projections, among others.
At Floyd, we work with more than 200 commercial lenders nationwide, with different types of products that allow us to orient you towards the financial product and the right lender and what is best for your business.
6. Do banks only grant commercial loans?
No. That is another of the great objectives we have at Floyd: to bring the lending market to the Spanish-speaking community because it is the best option when you can not access a bank loan.
7. How to know which is the best loan or financial product for my business?
Advise yourself That’s what we do at Floyd. If you enter our loan application form you will see that we have key questions that allow us to: assess your need and at the same time have an idea of what type of financial product can be adjusted for your business.
If you look at the form there is the question: What do you need? This question is key because it allows you to guide your need for capital for a specific financial product. For example: if you need capital to buy a truck or machinery one of the financing options that can be adjusted is Equipment Financing.
Remember: The money to grow or to make more money will always get better conditions.
8. What interest rates should I expect?
Each financial product has its range of interest rates (rates) and each lender handles interest rates based on their appetite for risk and the assessment of the credit profile of the borrower, always framed within the legal limits.
Now, it is important that you understand that interest will always be associated with a keyword: risk. The risk of what? Easy to not return the money.
And how is risk defined? Depending on what the analysis of your documents and your business say.
The more prepared you are, the more trustworthy you will be and the lender will be less risky in lending you money and, therefore, will be able to lend you as cheaply as possible.
9. If I just start my business, can I access a business loan?
Yes, although it will be more complex. We can consider two options:
A personal loan for business, where the rating will be based strictly on your personal behavior and your credit profile.
An SBA loan to start a business. It is a good option because you will get the best rates and the longest terms (5 or more years), but you will also have to work a lot to obtain it, because, additionally, from the documentation, you will be asked for a business plan and financial projections that prove that your idea may have the financial return necessary to repay the loan
10. How fast can a loan be obtained?
As fast as 3 working days, but you should keep in mind that usually, the faster financing options have higher costs, while the lower interest rate has slower processes, your Floyd growth advisor will guide you in the process.
11. Should I establish a business relationship with a lender?
Yes. As in any area of work in a business, obtaining permanent capital is always a fundamental need in the growth of a business. Your capital advisor should be at the same level as your insurance broker, accountant, lawyer, and banker. In this way, we will advise you so that you can build permanent and reliable relationships with sources of capital.
12. Can I deduct the interest on my tax return?
Of course! That is another of the advantages of working with a formal capital market that the interest or cost of the money you pay can be deducted as expenses in the tax return of your business.