Securing a Loan to Fuel Small Business Growth

When your small business’s survival is at stake, finding the right partner becomes crucial.

Over the past year, you have made big strides, with a string of successes from different fronts. Demand for your product or service has exceeded your initial expectations. You have tapped new markets which you thought were impossible to reach for your small venture.

And now your small business is at a crossroad — it can barely keep up with the demand.

Now, you are confronted with two choices: keep things at a standstill and turn away new customers, or take the next, inevitable step, which is expansion.

In order to move your business forward, you will need to scale up on much needed resources: manpower and equipment. But where should you start?

How the right bank can help your business grow

Banks, especially those that cater to the needs of small businesses, can help your venture grow in three key ways.

  1. Banks can help small companies grow their capital by investing excess profits. Now, the profits from these investments can then be used to fuel growth over the long term. Among the investment options offered by banks are stocks, bonds, real estate, and money market investments.

  1. Apart from offering SME banking accounts, many banks offer corporate credit cards to their customers. For a small business, this makes tracking expenses easier as these can be conveniently viewed in just one billing statement. Apart from that, a corporate credit card can be used for funding small investments, much like a loan.

  1. Finally, a bank can provide companies with loans which can be broadly classified into four types: term loan, mortgage, invoice finance, and overdraft.

Securing a loan for your business

Before going to your bank to secure a loan for your business, there are a few important things that you need to do first.

Start by evaluating both your business and financial plans. Check if both plans match your future goals and make the necessary adjustments to ensure that these reflect your objectives.

Ideally, your business and financial plans should match each other well, outlining the current status of your business and what needs to be done to make that successful leap forward.

Your plans should also include important details such as your recruitment plan, projected costs for growth, and pertinent details of the markets you plan on tapping.

Your bank will also need to take a close look at your company’s numbers. Be prepared to show your cash flow, sales, and profits.

Be aware that your chosen bank is making an investment in your company. As such, your banker will provide an objective assessment of your plans and, along that process, provide you with a critique of all the details that you laid down. If you have done due diligence, it will be easier for you to convince your bank to provide you with a loan.

Selecting the best type of loan

Another vital step that you must do before applying for a loan for your small business is identifying the best type of loan for your needs.

  • Secure a term loan if the primary focus of your growth goal is to expand your staff.
  • Bankers recommend an overdraft for businesses keen on expanding and keeping pace with the expenses associated with day-to-day costs.
  • Mortgages, on the other hand, are ideal for companies which are planning on investing on new assets, including properties.
  • Finally, invoice finance is a special type of loan designed to help small businesses improve their cash flow.

Do not hesitate to ask for help

Many banks that cater to small businesses encourage their clients to seek their help and advice.

Before solidifying your plans and outlining the documents you need to prepare, it is highly advisable that you set an informal meeting with your banker and communicate in broad terms what your plans are.

As experienced professionals, bankers can tell you early on what things you might be missing out on.

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