How Much Business Loan Can I Get From my Bank? – A loan from the bank is an important investment that can help your business get off the ground and secure the finances you need to grow your company.
But how much business loan can you actually get from your bank? That depends on how much money you want to borrow, what kind of collateral you have to offer, and other factors specific to your individual situation. Use these tips below to figure out how much business loan you can get from your bank.
What’s My Current Credit Score?
There’s a common misconception that banks give business loans to just anyone. In reality, your credit score plays a crucial role in how much money you can get from your bank.
(It’s also important in terms of what kind of loan you can get.) If your score is too low, you might not be able to get any funds at all; some banks will refuse to help start-ups or companies with poor credit histories.
Before applying for a business loan, it’s a good idea to see what sort of credit score you have and make sure it’s good enough for lenders. You can do that by getting three free credit scores on Credit Karma—you won’t need to enter any personal information, so there’s no reason not to try it out.
What Do Lenders Look For in an Application?
Lenders are interested in one thing: making money. They want to give as few loans as possible and recover every single penny of their investment.
For that reason, they’re careful about who they approve for a loan and how much they give to each individual borrower.
Before you even think about asking a bank for a business loan, make sure your business will be able to pay it back.
Am I Eligible for a Line of Credit?
The first step when looking at financing a business is to find out if you’re eligible for a line of credit from your bank.
A lot of people try to get loans for their businesses and are turned down because they don’t have sufficient income or assets to support them, but it may be possible to access some startup capital through a line of credit.
To be eligible, you’ll need a history of managing debt responsibly as well as at least 6 months’ worth of personal expenses saved in an accessible account.
Depending on your situation and how much money you need, your bank will either extend you credit or tell you that it can’t offer more than $5000-$10,000 (this amount varies by institution). If that happens, you’ll need to look elsewhere.
What Other Business Loans Are Available to Me?
In addition to business loans, you may want to research other types of loans that may work for your particular needs.
You can look at personal loans, small business loans, and home equity lines of credit for starters.
Keep in mind that each type of loan will have a set number of pre-determined criteria that must be met in order for you to qualify; while some banks allow additional leeway when it comes to business financing, they won’t have as much flexibility with personal or SBLOCs (smaller business loans).
If you find yourself facing difficulties qualifying for any type of loan, go online and do some research on other lending options—it’s possible there are new programs popping up every day!
Calculating Amount Needed for Financing
The amount you’ll need to borrow depends on your business model and whether you want to purchase an existing business or launch a new one.
To calculate how much business loan you may be able to get from your bank, use our business loan calculator tool.
The results will vary but can help give you a rough estimate of what you should expect when speaking with a lender.
As with any professional service, it’s always best to approach a bank with as much information as possible—and know that they’re there to work with your unique needs.
Not all businesses are created equal; they have different needs and requirements that will be taken into consideration when reviewing financing proposals.
Determining Down Payment Requirements
One of the first things you’ll need to figure out when applying for a business loan is how much money you’ll need to put down as collateral.
This isn’t required, but it’s a good idea to have at least 20% of your loan amount available in cash or other liquid assets that can be turned into hard currency (in other words, not your house or car).
If you don’t have enough down payment money set aside, you’ll either have to delay launching your business until you do—or risk getting denied because lenders don’t like approving loans they feel will be difficult to recover in case of default.
If things seem especially iffy with your business plan, consider putting even more money down as a safety net.
How Will My Monthly Loan Payments Be Determined?
Understanding how you’ll make monthly loan payments is important, especially if you plan to apply for a business loan from your bank.
Though banks can vary, there are generally two main options: interest-only or principal-and-interest loans.
With an interest-only loan, your monthly payment will be less each month than a principal and interest payment; however, your loan term will be shorter and you’ll end up paying more in total over time.
With a P&I loan (as it’s commonly known), all of your monthly payments go toward reducing principal, meaning that smaller payments will stretch out over longer periods of time but come with lower overall costs.
In either case, ask about how your payments might change throughout your repayment period. It may seem like a small difference at first—but those small differences add up quickly!