Important Factors to Consider When Financing Your Small Business

Running a business requires starting capital. If you are thinking of starting a small business, your biggest concern is probably around how to get financing for the business. The good news is that there are various ways you can secure a loan. In Ogden, SBA loans, lines of credit, as well as other types of microloans are all viable options if you are just starting out. If you are attempting to access one of these options, these are some important factors that will determine whether or not you get the financing approved.

1. The size of your business

Certain loans are available for only small businesses, which is why your business size matters. You may think of business as a small one, but in reality, it may fall under medium-sized businesses or may not even qualify for the loan. A small business is one whose revenue is between 750,000 to 38.5 million dollars per year. If you are applying for an SBA loan in Ogden, you will have to be within this size. If you are too small or too big, you will have to find different sources of financing.

2. Your lending credibility

A lot of factors go into determining the lending credibility of your business. Your credit score has to be high enough. Most loans and creditors will look at your credit score to determine whether you are in good financial shape. They will also want to look at your debt-to-equity ratio. This is a measure of how much your business has borrowed. If you have borrowed much more than what you have invested in your business, you will have poor debt-to-equity ratio. Investors or financers may not want to take the risk of your defaulting on loans.

3. Collateral

small cafe

They will also want to look at whether or not you have enough assets to pay them back in case you do not make enough profits to pay off the loans. Even if there is no mandatory requirement to have collateral for a business loan, you may be more likely to get one if you can show that your business owns assets or that you will be willing to pay back the loans personally from your own assets.

4. The age and finances of your business

Another important factor that will determine whether or not you get the financing that you have applied for is how long you have had your business for. If you haven’t had it for a number of years, you will not be considered eligible for many microloans. You will also have to show your financial statements, such as your cash flow statement, to show that you are solvent.

These are generally the most important factors that you should consider before going for financing. But there is a lot more than goes into securing a loan. Other things can also matter, such as the type of business you run, as money-lending businesses are not eligible for certain loans and are not considered safe by investors.