Top 10 Business Tips for Banking and Obtaining Loans

Let’s talk about how you can ensure you are banking better. Here are 10 noteworthy tips for you to keep in the back of your mind.

Loans

1. Know your options: It is of utmost importance to first learn about different lending options. Small businesses are eligible for various lending options. This includes regular business loans, typically used by companies looking to purchase physical assets (equipment, supplies, etc.). Along with this, there are also short-term borrowing options, like applying for a line of credit. With this, you will need a plan to repay the borrowed amount within 12 months or less. Applying for a business credit card is also a possible option for making smaller purchases, like everyday expenses. It is important to note that,, if a business has not built a credit history yet, obtaining loans and traditional financing may not be workable. In these cases, the business owner may resort to personal loans and then transition to business loans when the company has gotten to that point.

2. Consider your plan: When coming up with your desired lending option, you need to be considering how much money you plan on spending, when you expect to pay it back by and whether the expense will be recurring or a one-time purchase. In some cases, business owners will lean toward taking out a long-term loan for things like rent, along with opening a line of credit for recurring expenses such as insurance.

3. Gather the information needed: When applying for a loan, the banker will need to see your business’s tax returns. Depending on the size of the requested loan, the banker may need to see returns from a few years back. Along with this, you will need provide the banker with financial documents that will ensure your finances match your returns. Prepare to share with your banker your personal documents such as personal tax returns and financial statements. Banks look for any history of debt that could cause an issue with the business loan. This does not mean securing a loan requires perfect credit, although good credit is preferred.

4. Think about when to apply: In most cases, business owners don’t consider taking out loans because things are going well for their company. Actually, it is in the business’s best interest to apply for a loan when it is approaching its best point. For one, the application process itself will be easier and, for two, it provides a buffer in the instance that the business is faced with an unexpected shock. Waiting to apply until these shocks occur will make it more difficult to secure the needed loan.

5. Build a relationship: It is always simpler to obtain loans when your banker understands your business and its financial situation. This happens when communication is open and you are able to keep your banker up to date on a regular basis. This avoids the “catch-up” period when applying for a loan as your banker will already be in the know with your business.

Banking

1. Take advantage: Banks offer plenty of digital and automated services that will aid the financial productivity of your business. It is important that you ask about them and use them to your fullest potential. Look to use a bank that can provide automated bill pay services. This is extremely helpful for recurring payments as you can quickly and easily pay expenses like your monthly rent.

2. Don’t mix your expenses: Some business owners get caught up in the idea that using their personal credit card may be an easier way to finance their business. This is not the case. It is best to keep personal and business expenses separate. Hence, why business credit cards are available. Keeping a separation makes it way easier to keep record of expenses and will make taxes less tedious. When expenses are kept apart, your business will have the opportunity to build its own credit and obtain lending/rewards in the future.

3. Separate your savings: Similar to the above tip, it is recommended to keep your savings separate. Doing so allows easier planning for reserving funds needed for your business. A good way to ensure you keep your savings separate and efficient is to sit and think of a long-term plan.

4. Pick your merchant: Every business is different which means transactions can vary extensively. It is crucial that you decide upon a merchant account that will coincide with your transactions. For example, lower transactions may align with a volume-based payment plan in order to achieve some savings.

5. Research the right checking account: Business checking accounts are not all equal. In fact, the fees you pay will vary, especially if you have large numbers or transactions. These fees begin to add up, which is why it is important to research a checking account that will be beneficial for your situation. Compare different accounts to understand which ones will lower your costs while driving proficiency.

These are only a few tips for you to keep in mind when considering taking out business loans or going about general business banking. If you find yourself stuck and needing assistance in any process, don’t hesitate to reach out to a financial institution for help along the way.