If you are looking to start or grow a business, you will need access to capital. Small business loans from Lantern may be a way for you to get the capital you need. If this is your first time dealing with lending institutions, it can feel not very comforting trying to get a business loan. So here are some of the basic steps that you will need to follow.
Choose the Type of Loan You Will Need
Understandably, lenders want to know why you need the loan and how you intend to use it. This can help identify the correct type of loan for your business. For example, a traditional small business loan can have a high borrowing maximum, often reaching millions.
Startup financing, including personal loans and business credit cards, will require you to prove that your business has the cash flow to repay said loans. However, you may find it harder to access certain loans in your first year of operation because you don’t have the cash flow to prove that you can pay them back.
A business line of credit can help you cover your day-to-day expenses. This includes unexpected equipment failures, payroll, and helpful safety nets.
Find Out If You Qualify for a Loan
When looking to get small business loans from Lantern, it is essential to know the types of loans available and know the types of loans you qualify for. Factors considered are your credit score, the length of time your business has been operating, and your business’s amount of revenue.
Many lenders look for a minimum annual revenue of between $50,000 and $250,000. However, if your revenue is under this threshold, you may need to look for microloans or equipment financing. According to Lantern Credit by SoFi, “Lantern searches across different financing options, including SBA programs, small business financing options, and personal loans.”
Calculate How Much You Can Afford
This will require you to assess the financial standing of your business honestly. Look at your current and expected cash flow and determine the amount of money you can put towards loan repayment. In some cases, lenders want daily repayments, which should be factored in. Your total income should be 1.25 times your expenses. This number includes your repayment of the loan.
Choose Appropriate Collateral
It would help if you had some collateral to secure a loan. This includes equipment, property, and other items that a lender can seize if the loan is not repaid. Putting up collateral is risky. But it can also increase the amount that you can borrow, and it may lower your interest rates.
Getting the Loan
Once you’ve done your due diligence, the final part is gathering documents and applying for the business loan. Determine the type of loan and the lender that is right for you. Take the loan with the lowest APR you qualify for. Applying for a small business loan could affect your credit if you use your personal credit history.