When it comes to running your business and keeping it strong and successful, nobody aside from you — and if applicable, your team of trusted expert advisors — should tell you what to do. After all, it’s ridiculously easy to play “armchair business owner” and shout plays from the stands. But when you’re in the game and the stakes are real: the right moves advance you down the field, and the wrong moves could end up putting you face-to-face with a 350-pound linebacker in a rotten mood.
However, when it comes to applying for business funding solutions, you may not have the access to expertise that you need to make safe, smart and timely decisions. To help keep you on offense, here are 3 do’s and 3 don’ts:
3 Do’s When Applying for Business Funding Solutions
- Do explore all of your options. Contrary to what you may think or have been led to believe, banks are by no means your only source of funding. Make sure you look at the alternative lending marketplace to see what’s available, and what may be in your best interest — not your bank’s!
- Do analyze your spending and investment requirements, and apply for as much as you need — but not more than that. You’re typically much better off leaning on the conservative side (we’re talking funding amount here, not politics!) and either getting another loan down the road if you need more cash, or having a business line of credit available just in case you need immediate access to funds. Borrowing too much will put “dead money” in your account that increases your total cost of borrowing.
- Do keep a close eye on the calendar. Firms in the alternative lending marketplace typically approve loans in a matter of days, while banks and credit unions can take several weeks — or even many months. In fact, some SBA loans take more than six months to snake their way through dozens of loan officers, and there’s no assurance that once an application reaches the finish line that it will be approved.
3 Don’ts When Applying for Business Funding Solutions
- Don’t get misled into believing that you must secure your loan with collateral. Banks insist on collateral (which is one of the reasons the application/approval process takes so long), but many firms in the alternative lending marketplace don’t need it to approve your funding request. Naturally, unsecured loans are going to cost more than secured loans (all else being equal). But you may find it either necessary to go the unsecured route because you don’t have enough business and/or personal assets to pledge, or you may prefer it because it’s much faster and less risky.
- Don’t bother applying for a loan from your bank if you have less than outstanding personal and business credit scores, and if your business has not been operational for at least two years. Banks like talking about how much they support small businesses, but they have dramatically dialed back small business lending since the Great Recession. Further, the taps haven’t been turned back up yet — and there’s zero indication that will change in the future.
- Don’t get locked into the mindset that business funding is only suitable for expenses, such as purchasing inventory, hiring seasonal staff, paying a tax bill, and so on. Obviously these are all valid expenditures, but you can also use business funding to exploit profitable opportunities, such as expanding locations, increasing your online footprint, launching advertising and marketing campaigns, adding product/service lines, and so on. Also keep in mind that while banks typically insist that you use a loan for the purpose stated on your application, most firms in the alternative lending marketplace give you the freedom to allocate the money as you deem fit. After all, it’s your business and you should be in charge — not your lender.
At National Business Capital, we offer a full range of business funding solutions, including many that don’t require collateral. What’s more, we don’t insist on excellent credit, we don’t place restrictions on how funds can (or can’t) be used, our application review time is one business day (or less), and our approval rate is about 90 percent — compared to big banks where the no’s outnumber the yes’s by about a ratio of 10:1. To learn more, fill out our two-minute application and get a funding decision within 24 hours or less: