Whether in Jamaica or the rest of the world, if you plan to
start a business, you will need some form of capital. If you're starting a new
business, a small business loan can help you get started by providing working
capital to build a store, buy inventory, or promote your business. But how does
a small business loan benefit you in real terms, and do you even qualify for a
loan?
What is a Small Business Loan?
By definition, a small business loan is a certain amount of
money that is borrowed by a person who wants to start or operate his or her own
business. It is basically a type of personal loan given by lenders to small
business owners.
There are several types of small business loans. Unsecured
business loans are issued by a lender based on your credit alone without any
sort of collateral. Usually, you will need a high credit score and a very good
credit history as well as have a stable personal finance situation.
There is also business financing that can be based on
collateral such as real estate collateral, a vehicle or property that is free
and clear of debt, and so forth. Then, there is a commercial real estate
finance loan for which money is granted for a commercial property that is to be
used for business. There is also a business line of credit, which is a fixed,
predetermined amount of credit that a company can borrow against as needs
arise. The borrower will only be required to pay interest on the amount used.
Benefits of Small Business Loans
Obtaining a small business loan for your new business can
bring relief in many ways. It can give you working capital to help build your
business, promote it, and keep inventory. It can also help with the costs of
hiring employees if needed at the start. A small business loan enables you to
grow your new business without the financial stresses of a new business. Also,
the interest on a small business loan is tax deductible.
Small Business Loan Qualifications
Once you understand how business financing works, you must
consider whether or not you will qualify. It's good to know this before you
apply so that your credit history will not show various credit checks and
inquiries from lenders, which can lower your credit score for the future.
First, be sure your personal credit history is in order.
Find out your credit score by requesting a copy of your credit report. There
are many online resources available to check your own credit history. Also, be
sure your personal bill and loan payment histories have been consistent and on
time over the past two years or more. Small business lenders are likely to base
your approval on your personal credit history, especially if you do not offer
collateral.
Next, ask the lender directly about their business loan
qualifications. This can eliminate any questions in your mind before applying.
Finding a Lender
Do some research to find a small business lender that's
right for you. Check around online for interest rates, small business loan plans
and qualifications, and for flexibility. Some lenders will offer creative small
business loan options to work with your particular situation. Some lenders make
it easy to get approved while others make it almost impossible. Look for a
lender that is easy to work with from the start. Ask about early pay-offs,
lines of credit, flexible financing, guaranteed interest rates, and any fees
you will incur by using their services. However, beware of predatory loans and
other loan sharks that may try to rob you blind with ridiculous payment terms
Keep these tips in mind as you search for small business
finance solutions. You'll be on the road to success in no time!
Below are a few loan calculators that you could use to
calculate the amount you will need.
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