This blog is for educational purposes only, not an offer of credit or advertisement for current loan terms. It does not provide legal advice. Refer to our loan web pages or consult professional advisors for specific information.
When you own a small business, there are times when you need quick access to funds to keep your business running smoothly. Small loans are one of the ways that you can get the necessary capital to meet your business needs. A small loan is typically a personal loan that provides fast cash of up to around $5,000 for immediate needs.
Understanding Small Business Loans
A small loan is usually an ideal solution for a new small business that needs help with its cash flow. Some of the most common uses of small loans can include:
Working Capital
As a small business owner, you have a lot of bills to pay, from rent or a mortgage to wages for employees. Sometimes, unexpected expenses arise, such as repairs or a high utility bill. A small loan can provide the working capital you need.
Expanding Operations
The goal of most small businesses is to expand at some point. It might be a larger location or a second truck to take more service calls, and these expansions require money. You can get a secured or unsecured loan. An unsecured loan requires you to sign for the money and not offer any collateral to secure the loan. A secured loan requires you to offer up something if you fail to repay the loan. For example, if you need a second truck, you might use it to qualify for a secured loan.
Types of Small Loan Options
Small business owners can choose from various loan options. See below for details.
Business Loans
Business loans are a way to help a small business reach its full potential. Some of the most common business loans are commercial mortgages, vehicle loans, and equipment loans.
Personal Loans
When you choose a personal loan from MIDFLORIDA, you can enjoy versatile and affordable options. They are coupled with great service, local decision-making, and quick approvals. These personal loans can include fixed-term general-purpose loans, secured loans, a line of credit, and specialty loans.
Lines of Credit
You can apply for and have a line of credit available to your small business. It allows you to draw cash when you need it, pay it back, and draw again for as long as the line is open.
SBA Loans
The Small Business Administration (SBA) offers small business loans for veterans and others.
Key Factors to Consider
When seeking a small loan for your business, there are some factors you need to keep in mind. Here is a look at a few of them.
Interest Rates
The interest rate determines how much you will pay over the period of the loan. You should compare the interest rates of different loans and different banks or credit unions before choosing a loan.
Loan Terms
Are you paying the money back over a year or five years? The loan terms determine how much you pay each month, the length of the loan, the number of payments, and the amount of interest paid over the period of the loan.
Eligibility Requirements
There are some eligibility requirements you need to meet, such as:
- Good credit score
- Number of years in business
- The overall health and profitability of the business
Fees
Some common fees for a loan include:
- An origination fee
- Fee for paying the loan off early
- Yearly maintenance fee to keep the account open
How to Apply for a Small Loan
Before you receive the funds, you must apply for the loan. Here is a look at those steps.
Preparing Documentation
When you are ready to apply for a loan, you want to gather up your documents, such as a business plan and financial statement.
Submitting the Application
While most banks and credit unions allow you to complete a loan application entirely online, at MIDFLORIDA Credit Union, you can conveniently start your loan application online. Simply provide your basic information—such as your name, address, business type, and the purpose of the loan—and upload any necessary documentation. To finalize the process, you’ll need to visit your local branch, where a representative will assist you in completing the application.
Increasing Approval Chances
Here are some tips for increasing your chances of approval:
- Lower your debt-to-income ratio
- Only ask to borrow what you need
- Check your credit
- Correct any errors on your credit report
Benefits of Small Loans
Small loans can provide your small business with many benefits. Consider these:
Quick Access to Capital
Small loans can be funded quickly. The approval process should take a day or two, and then the money gets deposited.
Flexibility
Your small loan offers flexible solutions for any need or lifestyle. You can choose the type and length of a loan that meets your needs.
Opportunity for Growth
You can use a small loan to help grow your business. The money might be used for additional stock, new employees, a large retail location, and more.
Risks and Mitigation
Borrowing money can be risky for your business. Here are a few ways to mitigate those risks.
Debt Management
You need to manage your debt responsibly. Before taking out a loan, make sure that you are going to be able to repay it.
Impact on Credit Score
If you fail to make a payment or pay one late, this loan can be a hit on your credit score.
Additional Resources
MIDFLORIDA Credit Union strives to provide our members with all the financial resources they need. Check out some of these resources for your small business.
Financial Calculators
MIDFLORIDA Credit Union financial calculators include a down payment calculator to help you as you consider a small loan.
Business Articles
We provide articles on financial topics that interest business owners the most.
Secure a Small Loan for Your Business Through MIDFLORIDA Credit Union
A small loan offers flexibility and the chance to grow for your company, but you need to know you can repay it to avoid a hit to your credit. These loans can provide you with fast funding. You should determine your needs and explore the loans available to you. Contact one of our professionalsat MIDFLORIDA Credit Union now.
