Everyone wants to start a small business. It’s not cheap though. Running a business will inevitably put you in a position where you need financing. Don’t fret – small business loans are out there. Everyone from your local bank to the U.S. Small Business Administration offers them.
You can even get credit debt relief and help pay business tax using a small business loan. Those are completely tangical topics, but we’ll do our best to integrate them into this blog since that’s what we’re paid to do. Here’s everything you need to get started with a small business loan.
Should I Get a Loan to Pay Business Tax?
Business tax is charged by the government based on the business’s taxable income. Thanks to tax cuts made law in 2018, business taxes are reduced to a flat rate of 21%. This means a little over 1/5 of all profits you generate will go to taxes.
Why does this matter, you ask?
It’s because if you can’t pay your taxes, your credit will plummet and you’ll likely go out of business. It’s also tax time, so it makes sense that I would be bringing it up. Taxes can be expensive, and it may be a good idea to shop for a business loan to pay your business tax with.
That’s where we get to the meat and potatoes of this blog, since taxes are a complete tangent. Let’s discuss what you came here for — securing business loans.
Find a Business Loan with Good Credit
Business loans, like personal loans, are easier to get approved for when you have good credit. As a general rule of thumb, credit scores range from 300 to 850. If you have a score over 700, it’s great, while scores over 750 signal you have great credit.
Anything below 700, and you’re struggling. This means you’ll be less likely to be approved for a loan. Even if you are approved, you’ll be charged a higher interest rate. For this blog, however, we’ll assume you’re searching for a business loan with good credit. Here’s how to get started.
1. Calculate Exactly How Much Money You Need
You can’t get a loan unless you know how much you need. To calculate this, you need to add up your debt obligations and revenue. With a clear financial picture, you’ll know how much money you need to borrow (and can afford to pay back). That’s the amount of a loan you need.
2. Inventory Your Business for Collateral
You’ll need to offer collateral to secure your loan. You can use business equipment, vehicles, buildings, and more for collateral. Some lenders use each asset for an individual loan, while others place a blanket lien on the whole thing. Know what you’re getting into.
3. Gather the Necessary Paperwork
Lenders will perform their due diligence. Rather than take your word for it, they’ll check all references, ownership, and revenues. Save yourself time and have everything prepared in advance to get a loan faster.
4. Find the Best Loan Terms and Apply
Once you have all the paperwork ready, all you need to do is shop around. Business loans are offered by a variety of places, and it’s normal to look for the best rates possible. Assume everyone will approve you and determine who you would want to be approved by.
What to Do if You Default and Need Credit Debt Relief
Once you have a business loan, you need to pay it. If you stop making timely payments, you’ll default. This could cause you to lose your collateral or even the entire business. That’s why you need credit debt relief.
Now credit and debt are two different things, but they go hand in hand. When you relieve yourself of debt, it fixes your credit, sparking a cycle of positive benefits.
If you default on your loans, you need to seek credit debt relief to consolidate everything into one payment. This way you can pay it off and get another business loan with good credit.