How much Money can I Borrow with a Business Loan and How Should I Spend it?

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When you think about every brand out there they all share something in common: at some point, they require an influx of capital to keep delivering their products and to keep production non-stop to meet the demand of their services. No matter the size of the operation, or the type of business we are talking about, it’s almost a given in today’s economy that a business loan will be needed at some point to keep operating.

How much Money can I Borrow with a Business Loan and How Should I Spend it

To have access to this financial instrument there are a number of questions you should ask yourself to avoid going overboard and engaging in unwanted debt. Many banks and loan agencies are willing to lend you money, but you need to run a tight ship and be well-informed about the actual needs of your business to ask for the right amount of cash and to spend it just on whatever is needed.
 

First Question: what’s the status of your business?

Being aware of the financial situation of your business will allow you to have a better appreciation of the actual amount of money you need to get back on track. Business loans are usually granted to cover for the expansion of the operation or to solve a lack of cash flow.

When you deal with banks they usually take a hard and deep look to the finances of your company and depending on how reliable you are perceived, you’ll probably be asked for a down payment totaling a big percentage of the required amount you need to borrow. This puts many small business operations on the benches when it comes to dealing with them because the main reason they seek a loan is that they don’t have any money.

Loan agencies like Maxiron Group work in a very different fashion: they ask for less information and they are ready to give you the money after a brief discussion of your business strategy and little to no paperwork regarding your financial situation, however, they don’t lend big sums and their interest rates can be fixed, but also very high.
 

Second question: how much money do you actually need?

If you are set on asking for a business loan, you need to have a clear idea on how much money you need to solve the issues that need financing. Remember that banks and loan agencies work on perceived notions about your business operation: if you ask for too much money, they will probably wonder if you are knee deep in debt or if you are providing reliable data about the state of your finances. On the other side of the spectrum, if you don’t ask for enough money they will wonder why you need them for in the first place.

While banks and some lending agencies will ask for a sheet of projected costs and a detailed strategy on how you’ll use the borrowed money, it never hurts to be prepared with additional information about the structure of your business to offer some assurance to your lender about how their funds will be used. Sit down with your accountant and be prepared with a detailed profile detailing your profit and losses in case you need to provide more information about your reasons to ask for a loan.
 

Third Question: What are the Costs and the Final Impact of a Loan on Your Business?

A mixture of projections are tied to this particular question, but having a clear idea of the closing costs associated to your loan as well as the interest rate you’ll have to handle for the time you’ll be paying back the money  will help get a clear idea of the total amount of money you’ll pay back. Doing this calculation ahead can even lead you to have a clear proposal when is time to negotiate the type of loan you will need.

Once you have the money you need to have a clear idea on how you’ll manage the incoming revenue generated by the influx of cash. Think about a strategy to tell apart how much of that money is actual profits and how much of it has to be destined to pay back the loan. Once you get a handle on this process and clear your business loans in a prompt fashion, you’ll be able to get more financing to expand your business
 

Final Question: How do I spend the Money?

This may the easiest question of the bunch if your thought process followed the structure proposed by this article. By now you should have a pretty clear idea about the financial needs of your business. Spending the money granted on a loan is closely tied to a strategy, and that strategy is closely tied to a business plan or a schedule.

Are you looking to cover expenses generated due to late payment of your clients? Are you looking to increase your production capabilities? Are you looking to expand your operations? Those are the most common lines of action when it comes to handling the money of a loan. The needs of your business are the ones that will dictate your course of action in this regard.

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