San Diego can be an excellent place to operate a business, but like any other entrepreneur you will need certain resources. For example, every business needs capital at some point in their growth. Many businesses borrow the capital they need through a business loan. It’s the phrase, “spend money to make money” in action.
Borrowing money with a business loan can provide your company with the resources it needs to fund essential operations during critical stages of its growth. However, there are several steps you should go through before applying for a business loan in San Diego, so that you can maximize your chances of a positive experience. Below are some strategies that will help you make strong choices about your lenders, and let you make effective plans for the money you borrow.
Figure Out Your Finance Needs
There are many valid reasons to take out a business loan, but you need to be specific. It’s an excellent idea to apply for a business loan when you need the money for a clearly defined reason, but it is not a good idea to borrow without a purpose. Be responsible about the money you borrow so that you can leverage it and pay it back effectively. Some common reasons for taking out business loans include:
- Purchasing inventory so that you can continue to make sales and fulfil orders.
- Buy new equipment to make your production process more efficient and increase profits.
- Expanding your operations by opening up new locations in different areas.
- Paying for marketing campaigns to acquire more customers from new markets.
- Increasing your working capital so that daily operations can continue until your business becomes profitable. This is a common reason for newer businesses to borrow money, since it can typically take over two years for a startup to make a profit.
Decide What Type of Loan Fits Those Needs
Just as there are different reasons to take out a business loan, there are several different kinds of business loans available in San Diego. The success of your borrowing strategy will depend in large part on how well the type of loan you take out matches your finance needs.
Many people assume that bank loans are the best option simply because they are well-known. However, bank loans are far from the only borrowing strategy you can pursue in the San Diego area, and they may not be the option best suited to your needs. The relatively low interest rates on many bank loans can make them attractive to established businesses that can afford to put assets up as collateral and make lump-sum payments each month. For many small businesses though, these expectations are not reliable, and they may also lack the necessary credit to be approved for one. Also, according to industry data, over 84% of all business loan applications submitted to banks are turned down.
Unlike conventional bank loans, it is also possible to apply for a business loan through the Small Business Administration. SBA loans can be administered through a bank, a microlending institution, or one of several community development programs. Because most of the loan is government subsidized, SBA loans provide less risk for lenders and often have gentler terms than bank loans for borrowers. They make excellent options if you can pay the attendant fees and wait for the loan to be approved. However, this makes them less practical for time-sensitive expenses like purchasing inventory in preparation for the holidays or acquiring short-term working capital fast.
If you do not have the collateral or credit for a bank loan and lack the time to wait for SBA approval, you may wish to look at alternative forms of financing. Some private lending companies offer short-term working capital loans for businesses who need other borrowing options. Short-term working capital loans often do not require perfect credit or collateral, and can be approved quickly. As long as your lender offers reasonable terms, these can be the best options for newer businesses and those with time-sensitive concerns.
Decide What You Need in a Lender
Once you know what kind of loan will be best for your purposes, you should decide on the kind of lender you want. Ask yourself what the most valuable qualities in your lender should be. Do you want them to provide you with fast approval so that you can have the money in time for an upcoming deadline, or are you most concerned with being able to repay it easily? The answers to these questions can determine the lender you approach first.
Compare Lenders and Choose the Right One
Not all lenders are the same, so it is important to choose yours carefully. Although SBA loans are all governed by a set of core policies, the terms of loans offered by banks and alternative lending companies can vary widely. Always do your research and compare with other lenders before deciding on an option.
At Mulligan Funding, we distinguish ourselves from other lenders in several important ways. Firstly, we require only 6 months of company history, as opposed to the 2 years needed by most banks. Secondly, we usually approve loan applications in 24-48 hours, instead of the 60-90 days required by the SBA. Finally, we separate ourselves from other alternative lending companies by refusing to charge the double fees that have become common throughout the industry. Our policies are designed to help small and new businesses access capital when they need it quickly, and pay it off easily.
Acquiring a business loan in San Diego can be easy when you follow the procedure outlined above. Define your goals, match them to the type of loan that is most appropriate, and find a corresponding lender like Mulligan Funding, that treats you as a valued business partner instead of a number.
Call Mulligan Funding at 855-326-3564 to discuss your financing options today!
*The information shared is intended to be used for informational purposes only and you should independently research and verify.