Small business loan checklist: business skills

Most small businesses will need a loan at some point, it’s rare for someone starting a business to have all the capital they need to get up and running, or to pay for expansion further down the line. Getting the right finance can be a make or break issue for some businesses, so here are some tips to help you find the right loan.

Image by jferzoco via Flickr.

Small business loans: a checklist

When you come to a point where you need a loan for your small business, use this checklist to help make sure you get the right one:

• Know how much you want to borrow and for how long. Really think about how much you need to borrow to get your business where you want it to be. Think realistically about what you can repay and what period you can repay it over. Remember that if you borrow too little and have to change the loan agreement later on to borrow more, there may be charges.

• Bring your business plan. Your business plan will be really useful for showing what you’ll use the money for and how you’ll be able to repay it. (Don’t have one? Find out about business plans and forecasting.)

• Do your homework. It’s essential that you shop around if you want to make sure you’re getting the best deal. (But of course we’d say that - comparing prices is in our nature!)

• Be bold and negotiate. Do your research and make sure you know what’s available on the market. The lender is likely to give you a better offer if they know you’ve found other deals. Don't forget to negotiate over terms and fees as well as the interest rate.

• Always read the small print.

• Choose your security carefully. The lender will ask you you to nominate assets as security in case you’re unable to repay your loan. Avoid using your home as security at all costs.

Other options for small business loans

Many people think that they have to get a small business loan from their bank, but that’s not necessarily the case. There are plenty of different places you can go for finance, which is good news, because it means you’ve got a better chance of finding a loan that will fit you and your business.

One alternative to a traditional loan provider is peer-to-peer lending, where people with money to invest lend their money to businesses that need a loan. Businesses like Funding Circle act as an intermediary and put potential lenders in contact with potential borrowers. Sound interesting? We’ll be back with with more information about peer-to-peer lending networks like Funding Circle in the next few weeks.

See last week's business skills post on tax and VAT.