You followed your dream and launched your business with the goal of achieving success – but without enough capital, did you know that your business will likely be stuck in the same place? However, with funds in-hand, you can invest in your business in ways that your business’s earnings alone likely can’t support.
The key is to get the right business loan: debt that can help you leverage working capital, purchase new equipment, buy commercial real estate, refinance high rate debt and much more, with a monthly payment that you can comfortably afford.
Here’s how to find the right loan to achieve your goals in 2024 and beyond.
Debunking the myths about business debt
If you’re hesitant to take on business debt because you’re concerned that you won’t be able to repay your loan or that interest rates are too high now, rest easy: When a loan is properly structured to meet your needs and goals, you won’t have to worry.
Here’s why: When you work with a responsible lender, like Grow America, we’ll size the loan to meet your needs with terms that make it easier for you to make your payments. This is called “properly structured debt” and it means that you’ll get a loan with an affordable interest rate and a longer repayment term.
The result is long-term financing that helps you achieve growth, while you put your cash toward immediate needs like hiring more employees, expanding your inventory, or building a rainy-day fund.
The difference between good debt and bad debt
Our parents may have taught us that if you can’t afford something with your current funds, don’t buy it–but that rule simply doesn’t apply to a growing business. The key is to ensure that the debt you take on is properly structured and leads to growth:
- Good debt feels comfortable: The monthly repayment is one that you can make without stress, because your interest rate and term make borrowing a larger amount of money more manageable.
- Bad debt feels stressful: It comes with higher interest rates and shorter repayment terms, which leads to higher payments that you’re not certain you can make each month.
In a nutshell, good business debt makes your finances stronger over the long term, while bad business debt weakens your finances and causes unnecessary stress for you and your business.
Set clear business goals to align financing with your objectives
Now that you know what to look for, the next step is to define your goals and objectives.
What would you like your business to accomplish in 2024 – and what do you need to achieve this?
Think about equipment you need to purchase, renovations you’d like to make, or services you want to expand. The answers will help you determine what needs to be financed and how much to borrow. Your accountant and other financial advisors (such as your business’s management team) can also provide valuable insight and clarity.
Preparing for a loan: Steps to ensure your business is financially healthy
Although you may not need a formal business plan to apply, putting your goals into a short summary will help you communicate your objectives to lenders, so they understand how financing will help your business grow.
Once you’ve clarified your goals, ask yourself the following questions:
- Is your business profitable (and, if not, can you show how a loan will help to turn that around)? Or, is your business a start-up with strong projections?
- Are you able to pay yourself a salary?
- Are you current on all personal and business taxes?
- Do you know your personal credit score? This will help you understand your loan options better, even if it’s not currently strong.
- Can you comfortably pay any existing business debt or other loans?
If you answer “yes,” then you’re in a good position to apply. If not, work with your accountant or another trusted financial professional to get ready. Following that, do some research to find a knowledgeable and responsible lender, like Grow America, that makes small business loans in your region.
Achieve your goals and unlock growth with a business loan
We’re a non-profit, community development lender focused on providing underserved small businesses with low-cost capital and flexible, longer-term repayment periods. Contact us today to learn more.