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Unlike other types of business financing, there is a lot to be aware of regarding commercial loans. In most cases, when businesses make debt-based funding arrangements with lenders or other types of financial institutions, it is referred to as commercial loans. A company will apply for a commercial loan and use the proceeds for certain operational functions or large capital expenses such as:
- meeting payroll expenses
- purchasing inventory and supplies needed for manufacturing certain products
- replacing non-functioning or outdated equipment and machinery
These types of loans are oftentimes viewed as short-term funding or a source of cash by a wide range of businesses and industry sectors.
Can all Businesses benefit from Commercial Loans?
In most cases, businesses of all sizes and types can use commercial loans for the reasons listed above as well as other factors. Small businesses may not always have access to debt or equity financing markets due to expensive upfront costs and other regulation related obstacles. So they have to rely on banks, lenders, and other financial institutions to meet their specific needs.
Four Questions to ask Yourself
Whether you are attempting to expand your existing company or start up a new business, you are probably going to need some type of financing in order to have the funds or working capital that you need to reach your goals. Biz4loans can help you achieve those goals, depending on your company’s past credit history. In either case, you are going to need to consider the questions below.
1. How will the distributed loan be spent?
Start by determining whether or not your business will suffer if you don’t get this loan. Will you have to use outdated equipment or not be able to hire more employees for anticipated growth? The bottom line is that you need to identify your needs and make sure the amount of your loan can cover those needs.
2. How long have you been in business?
Do you own and operate an existing business or are you just getting started? Biz4loans only works with businesses that have been established for a minimum of 3 years because we know that there is no substitute for experience. If you haven’t been in business that long, you might be able to find some strategies and tips for building business credit and developing a healthy cash flow at the Biz4loans Blog.
3. What is your contingency plan?
What if something unexpected occurs such as a sharp downswing in sales? Do you have a contingency plan or “Plan B” for repaying what you owe?
4. What is your credit history like?
How is your past payment history with service providers, suppliers, and vendors? Your credit history speaks volumes about your ability to meet financial obligations and your level of commitment. It also provides lenders with an insight into your management and operational skills. All of these factors will either delay or expedite your loan approval.
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