If you own a business, you know that competition is fierce and there’s no end to the number of companies trying to offer the same products or services. It’s not easy for any company to stand out, but getting an edge can help your business succeed.
To do that, however, you need funds. Getting a commercial loan as initial capital to start your business is critical in today’s world. After all, every dollar you invest in your company is one less dollar you have available in your bank account. The question is: How can you secure a commercial loan for your business? Here are some tips that will help you get financing for a new venture.
How to Secure a Commercial Loan?
When you start the process of securing a commercial loan for your business, you’ll need to provide your lender with all relevant information, including your business plan. This will help your lender understand how you’ll use the borrowed funds and how you’ll repay the loan.
The seller will require you to provide some form of security against the sale. This is normal and doesn’t necessarily mean you’ll be in a worse position than you are now. What’s important, however, is that you make the lender aware of what type of security you’re willing to provide so that you don’t leave them hanging.
How much does it cost to get a commercial loan?
The interest rate that is charged on the commercial loans will vary depending on several factors, including the amount of the loan, the credit rating of the borrower, and the current economic conditions. However, you can use the Federal Reserve Board’s Interest Rate Survey as a reference to help you get an idea of what interest rate you might expect.
Other fees come with obtaining a commercial loan, including application fees, underwriting fees, and origination fees. The application fee is charged when you fill out the application for the commercial loan and is non-refundable.
The underwriting fee is charged when your application has been approved and the lender reviews your credit report and assets. The origination fee is charged for administrative costs (such as processing the application and setting up the loan).
Tips to help you secure a commercial loan for your business
Invest in yourself. As with every other business endeavor, if you want to get a lender to invest in your business, you first need to invest in yourself. Investing in yourself can take many forms, but it essentially boils down to having a good credit history and having a solid plan for your business.
Choose your lender wisely. If you’re seeking a commercial loan, you’ll have to select a lender and there are many to choose from. You’ll want to select a lender who understands your industry, has a proven track record of lending to businesses in your industry, and has a reputation for being fair and trustworthy.
Be prepared to wait. While you will likely be approved for a commercial loan, you won’t get the money immediately. You may have to wait several weeks as lenders have their own set of timelines.