8 Questions to Ask Yourself Before Applying for a Business Loan

ByNaftali FeigAug. 06, 2020

This site is a free online resource that strives to offer helpful content and comparison features to its visitors. Please be advised that the operator of this site accepts advertising compensation from companies that appear on the site, and such compensation impacts the location and order in which the companies (and/or their products) are presented, and in some cases may also impact the rating that is assigned to them. To the extent that ratings appear on this site, such rating is determined by our subjective opinion and based on a methodology that aggregates our analysis of brand market share and reputation, each brand's conversion rates, compensation paid to us and general consumer interest. Company listings on this page DO NOT imply endorsement. We do not feature all providers on the market. Except as expressly set forth in our Terms of Use, all representations and warranties regarding the information presented on this page are disclaimed. The information, including pricing, which appears on this site is subject to change at any time.

8 Questions You Should Ask Yourself When Applying for a Business Loan
Whether you need to hire additional employees or purchase new equipment, growing your business requires capital.

Most small business owners need a loan at some point. As your business grows, your need for funding does not diminish. Whether you need to hire additional employees, want to introduce a new product or service, expand your facilities, or purchase new equipment, growing your business requires capital.

Before you start filling out loan applications there are some things you should consider, ask yourself these 8 key questions:

1) How Much Is My Business Worth Today?

Lenders want to know that your business is worth enough to cover the loan. You need to have a sustainable business model that will last at least as long as the term of the loan you are seeking.

2) How Much Do I Really Need?

Make sure you know exactly how much money you need for what you are planning. The best way to do this is to create a monthly cash-flow projection. Lenders want to see that you have thought this through.

3) What Is The Money For Specifically?

Lenders want to see a detailed plan for the money. If you plan to purchase new equipment you need to show price quotes and demonstrate why you need the equipment, and how it will benefit your company's growth.

4) Will The Money Help My Business Grow?

If you're trying to borrow money to cover payroll or other everyday expenses then your business is not going to make it further than a few months. By not using the money to generate more revenue you are only delaying the inevitable. You need to find ways to increase revenue and decrease costs so that your business can survive.

5) How Urgent Is My Need?

Whenever possible, it is better to anticipate future needs than try to find money under pressure. It's much easier to gain approval for a loan when your business is doing well than when your business is already struggling, so plan ahead.

Small Businesses Finance
 How are your personal finances?

6) How Are My Personal Finances?

Until your business grows beyond a "small business" (upwards of $5 million in revenue per year), lenders are going to rely heavily on your personal financial situation and credit score in determining the creditworthiness of your business. So, make sure these are in good standing before applying for a loan.

7) Am I Likely To Qualify For A Loan?

Applying for a loan and being turned down will hurt your credit score. It's a good idea to contact lenders and ask for their specific requirements, such as credit score and cash flow, before you apply.

8) How Strong Is My Management Team?

Businesses looking for funds to grow need to show the ability to effectively manage the growth. If your current team isn’t up to the task, consider adding a new hire to help take your business to the next level.

Grow Your Business

Before applying for a growth loan you need to make sure you have thoroughly determined your need, reviewed your current situation, and considered all of your options. If you can show that the money will be used to increase revenues then you are well on your way to qualifying for a small business loan.

Ready to apply for a loan to grow your business? Make sure you're properly prepared with this help Small Business Loan Checklist.