When is the Right Time to Get a Commercial Business Loan?
Whether you're an established business owner looking to expand or have dreams of opening your own company, a commercial business loan can help you obtain the capital you need to achieve your goals. However, it can be tricky understanding exactly when you should apply for a commercial business loan and understanding when you're most likely to be approved for a loan. Here are some factors to consider when deciding if it's time to apply for a business loan.
The Strength of Your Personal Credit History
Though it's possible to build a credit history for your business, if you're running a sole proprietorship or applying for a commercial business loan for a new business, lenders will examine your personal credit history. They'll look at your overall credit score, including whether your existing credit cards and lines of credit are maxed out and if you have a history of making late payments or defaulting on your debts.
Ideally, you should apply for a commercial business loan when your personal credit is strong. The better your credit, you will have a higher chance of loan approval and a lower interest rate.
When You Need the Money
Timing is important when applying for a commercial business loan. You don't want to wait too long and apply for the loan when you're extremely strapped for cash; otherwise, the lender may view you as too risky to loan money to. Or you might face financial woes waiting for the loan to be approved and funded.
Alternatively, you don't want to apply for the loan too early, or this will increase the amount that you have to pay. Try to apply for a loan before you need the money, but not so early that you don't have a chance to make accurate projections.
The Type of Loan You're Applying For
There are a few different varieties of commercial business loans, some of which have more stringent lending requirements. Others have less strict criteria but may be more costly or have less flexible terms.
A business line of credit is a great option if you want to have additional capital available for emergencies or unexpected opportunities. You only take draws as you need them, and payments are flexible. However, your line of credit may not be sufficient for larger purchases. If your credit isn't strong, this will result in a lower limit.
Installment loans have fixed monthly payments and a pre-determined term and interest rate. Lending requirements tend to be more stringent, especially for unsecured loans. Ready to apply for your commercial loan? Contact CCCU to get started!